No. 97-303
In the Supreme Court of the United States
OCTOBER TERM, 1997
HUMANA INC., AND
HUMANA HEALTH INSURANCE OF NEVADA, INC., PETITIONERS
v.
MARY FORSYTH, ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING RESPONDENTS
SETH P. WAXMAN
Solicitor General
Counsel of Record
FRANK W. HUNGER
Assistant Attorney General
LAWRENCE G. WALLACE
Deputy Solicitor General
JEFFREY A. LAMKEN
Assistant to the Solicitor
General
ANTHONY J. STEINMEYER
HOWARD S. SCHER
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTION PRESENTED
The McCarran-Ferguson Act states that "[n]o Act of Congress shall be
construed to invalidate, impair, or supersede any law enacted by any State
for the purpose of regulating the business of insurance, or which imposes
a fee or tax upon such business, unless such Act specifically relates to
the business of insurance." The question presented is whether the McCarran-Ferguson
Act precludes a private party from bringing suit under the Racketeer Influenced
and Corrupt Organizations Act, 18 U.S.C. 1961 et seq., to obtain a federal
remedy of treble damages, 18 U.S.C. 1964(c) (Supp. II 1995), for a pattern
of mail fraud allegedly perpetrated by a healthcare insurer, where state
insurance law does not provide a treble damages remedy.
In the Supreme Court of the United States
OCTOBER TERM, 1997
No. 97-303
HUMANA INC., AND
HUMANA HEALTH INSURANCE OF NEVADA, INC., PETITIONERS
v.
MARY FORSYTH, ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING RESPONDENTS
INTEREST OF THE UNITED STATES
The United States prosecutes criminal activity in the insurance business
under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
1961 et seq., and other criminal statutes, and has obtained civil injunctions
against such activity under 18 U.S.C. 1345. The United States also enforces
the Fair Housing Act, 42 U.S.C. 3601 et seq., and other civil rights statutes
touching upon insurance practices. In response to this Court's invitation,
the Solicitor General filed a brief at the petition stage on behalf of the
United States as amicus curiae.
STATEMENT
1. Prior to this Court's decision in United States v. South-Eastern Underwriters
Ass'n, 322 U.S. 533 (1944), it often had been assumed that "[i]ssuing
a policy of insurance [wa]s not a transaction of commerce," Paul v.
Virginia, 75 U.S. (8 Wall.) 168, 183 (1869), and consequently that federal
law did not apply to the business of insurance. Department of Treasury v.
Fabe, 508 U.S. 491, 499 (1993); St. Paul Fire & Marine Ins. Co. v. Barry,
438 U.S. 531, 538-539 (1978). In South-Eastern Underwriters, however, this
Court held that an insurance company doing business across state lines was
engaged in interstate commerce; it further held that, as a result, the Sherman
Act applies to the business of insurance. 322 U.S. at 539-561.
That decision triggered concern about the extent to which federal law might
pre-empt state insurance regulation. St. Paul Fire & Marine, 438 U.S.
at 539. As the dissenting opinions in South-Eastern Underwriters explained,
the Sherman Act itself would (under the Court's decision) pre-empt certain
state insurance laws: The "statutes of at least five states will be
invalidated by the decision as in conflict with the Sherman Act." 322
U.S. at 581 (Stone, C.J., dissenting); see id. at 586-587, 590-591, 595
(Jackson, J., dissenting). The dissenting opinions also raised the specter
that, because the Court had held the sale of insurance to be interstate
commerce, state regulation might be displaced entirely under the Court's
dormant Commerce Clause jurisprudence. See id. at 581 (Stone, C.J., dissenting)
("The extent to which still other state statutes will now be invalidated
as in conflict with the commerce clause has not been explored in any detail.");
see also id. at 586-587 (Jackson, J., dissenting) (warning that the Commerce
Clause has the effect of "restricting state power").
In response to those concerns, and to lend "support to the existing
and future state systems for regulating and taxing the business of insurance,"
Congress in 1945 enacted the McCarran-Ferguson Act, 15 U.S.C. 1101 et seq.
Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429 (1946). Section 1 of
the Act, the Act's statement of policy, "declares that the continued
regulation and taxation by the several States of the business of insurance
is in the public interest and that silence on the part of the Congress shall
not be construed to impose any barrier to the regulation or taxation of
such business by the several States." 15 U.S.C. 1011. Sections 2 through
5 of the Act implement that policy, addressing each of the concerns raised
in the South-Eastern Underwriters dissents. 15 U.S.C. 1012-1014.
In Section 2(a) of the Act, Congress put its imprimatur on state regulation
of insurance, ensuring that Congress's failure to regulate interstate insurance
transactions would not be construed under the dormant Commerce Clause as
barring state regulation. "The business of insurance, and every person
engaged therein," Section 2(a) declares, "shall be subject to
the laws of the several States which relate to the regulation or taxation
of such business." 15 U.S.C. 1012(a). And to mitigate the immediate
effect of the antitrust laws (and certain other specifically identified
federal laws) on state regulatory regimes, Congress in Sections 2(b) and
3 imposed a partial moratorium on their application to the business of insurance
for four years, and made them generally applicable thereafter only to the
extent that the insurance business had not been regulated by the State.
See 15 U.S.C. 1013(a) (Sherman Act, Clayton Act, Robinson-Patman Act, and
FTCA "shall not apply to the business of insurance" until "June
30, 1948"); 15 U.S.C. 1012(b) (Sherman Act, Clayton Act, and FTCA "shall
be applicable to the business of insurance to the extent that such business
is not regulated by State Law"); see also 15 U.S.C. 1013(b) (McCarran-Ferguson
Act does not preclude antitrust actions with respect "to any agreement
to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation").
Most pertinent here, in Section 2(b) Congress addressed the concern that
other federal statutes-not yet enacted or not specifically identified in
the McCarran-Ferguson Act- might be read to displace state insurance regulation
and taxation. To prevent that, Section 2(b) creates a special rule of statutory
construction:
No Act of Congress shall be construed to invalidate, impair, or supersede
any law enacted by any State for the purpose of regulating the business
of insurance, or which imposes a fee or tax upon such business, unless such
Act specifically relates to the business of insurance.
15 U.S.C. 1012(b). The McCarran-Ferguson Act is thus designed to "remov[e]
obstructions" to state insurance regulation and taxation "which
might be thought to flow from [Congress's] own power, whether dormant or
exercised, except as otherwise expressly provided in the Act itself or in
future legislation." Prudential, 328 U.S. at 429-430.
2. In 1970, Congress enacted the Racketeer Influenced and Corrupt Organizations
Act (RICO), 18 U.S.C. 1961 et seq., as part of an effort to eradicate organized
crime. See Organized Crime Control Act of 1970, Statement of Findings and
Purpose, Pub. L. No. 91-452, 84 Stat. 922. In relevant part, RICO makes
it unlawful for "any person employed by or associated with any enterprise
engaged in [or affecting] interstate or foreign commerce, to conduct or
participate * * * in the conduct of the enterprise's affairs through a pattern
of racketeering activity." 18 U.S.C. 1962(c). Racketeering activity
includes "any act * * * 'indictable' under numerous specific federal
criminal provisions, including mail and wire fraud." Sedima, S.P.R.L.
v. Imrex Co., 473 U.S. 479, 481 (1985); see 18 U.S.C. 1961(1)(A).
The United States may bring criminal charges or initiate civil proceedings
against RICO violators. See 18 U.S.C. 1963 (criminal penalties), 1964(a)
and (b) (civil proceedings by the Attorney General). In addition, RICO provides
a private right of action under which "[a]ny person injured in his
business or property by reason of a violation of" RICO may bring suit
to recover "threefold" the damages sustained plus "the cost
of the suit, including a reasonable attorney's fee." 18 U.S.C. 1964(c).
3. Respondents are certain beneficiaries of group health insurance policies
issued by petitioner Humana Health Insurance of Nevada ("Humana Insurance").
Pet. App. 2a.1 Under those policies, Humana Insurance was obligated to pay
80% of a beneficiary's hospital charges over and above a designated deductible
amount; the beneficiary was to pay the remaining 20% as a co-payment. Ibid.
Respondents allege that, beginning in 1985, petitioners perpetrated a massive
fraud to shift payment obligations from themselves to policy beneficiaries.
Respondents charge that Humana Insurance and Humana Sunrise Hospital (Sunrise
Hospital) (an acute care facility in Nevada owned and operated by petitioner
Humana, Inc.) entered into a secret arrangement under which Humana Insurance
obtained discounts of between 40% and 96%. Pet. App. 2a-4a, 43a. According
to respondents, the entire discount was credited toward Humana Insurance's
80% obligation. Id. at 3a-4a, 43a. Policy beneficiaries, in contrast, continued
to be billed for co-payments as though Sunrise Hospital were charging the
full, undiscounted rate. Id. at 3a-4a. As a result, those making co-payments
were misled into paying far more than 20%-and Humana Insurance paid far
less than 80%-of total charges. For example, Humana Insurance might receive
an 89% discount on a hospital bill of $5,000, and thus receive a bill for
just $550 (11% of $5,000). The co-payor, however, would pay 20% of the undiscounted
rate of $5,000, or a total of $1,000. See Pet. App. 57a. Thus, of the $1,550
charged by Sunrise Hospital, $1,000 or nearly 65% would be paid by the policy
beneficiary, while only $550 or just over 35% would be paid by Humana Insurance.
Ibid. Under respondents' understanding of the co-payment provision, the
beneficiary should have paid just 20% of total charges, or $310, and Humana
Insurance should have paid 80% of total charges, or $1,240. Ibid.
4. Respondents brought suit in the United States District Court for the
District of Nevada, seeking recovery under several causes of action, including
RICO. Respondents charge that petitioners engaged in a pattern of racketeering
activity consisting of mail, wire, radio, and television fraud, and that
the frauds deceived respondents into making excessive co-payments. Pet.
App. 20a-21a; J.A. 126-131.
The district court granted petitioners' motion for summary judgment on the
RICO claims. Pet. App. 21a, 91a-96a. The McCarran-Ferguson Act, the district
court ruled, precludes the application of a federal statute if (1) the statute
does not "specifically relate" to the business of insurance, (2)
the acts challenged under the statute constitute the business of insurance,
(3) the State has enacted laws regulating the business of insurance, and
(4) state law would be superseded, impaired, or invalidated by application
of the federal statute. Id. at 91a-92a. After concluding that the first
three factors were satisfied, the court noted that Nevada has a comprehensive
scheme of insurance regulation, id. at 93a-94a, under which the Nevada Commissioner
of Insurance has "exclusive jurisdiction in regulating the subject
of trade practices in the business of insurance." Nev. Rev. Stat. §
686A.015 (1997) (quoted in Pet. App. 93a). Because RICO's private remedies,
including its treble damages provision, far exceed state insurance law penalties
for the same conduct, the court concluded that permitting policy beneficiaries
such as respondents to seek relief under federal law would "invalidate,
impair, or supersede" Nevada law within the meaning of the McCarran-Ferguson
Act. Id. at 95a.2
5. The court of appeals reversed in relevant part. Relying on its decision
in Merchants Home Delivery Service, Inc. v. Frank B. Hall & Co., 50
F.3d 1486 (9th Cir.), cert. denied, 516 U.S. 964 (1995), and in accord with
the reasoning of decisions of the First, Fourth, Fifth, and Seventh Circuits,
see pp. 22, 26, infra, the court of appeals rejected the notion that the
existence of state regulation is, by itself, sufficient under the McCarran-Ferguson
Act to preclude application of federal law. Instead, the court of appeals
held that federal law does not "invalidate, impair, or supersede"
state insurance law within the meaning of the Act unless federal law conflicts
with state law. Pet. App. 24a-25a. Mere overlap in the coverage of Nevada
insurance law and RICO, it held, "does not create a conflict between
federal and state law" since neither law prohibits conduct that the
other compels or permits. Id. at 25a. Accordingly, the court of appeals
reversed and remanded in relevant part. Ibid.
SUMMARY OF ARGUMENT
A. When Congress enacted the McCarran-Ferguson Act in response to this Court's
decision in United States v. South-Eastern Underwriters Ass'n, 322 U.S.
533 (1944), it used the terms "invalidate, impair, or supersede [state]
law" in the same sense as had the South-Eastern Underwriters dissents-to
mean, in modern parlance, "to pre-empt." That was the prevailing
legal understanding of those terms when the McCarran-Ferguson Act was passed,
as evidenced by their use in this Court's cases, and by their use by Congress
itself. Thus, far from creating a special rule to prevent the application
of federal law with incidental effects on state insurance regulation, Section
2(b) of the McCarran-Ferguson Act, 15 U.S.C. 1012(b), is "a special
federal anti-pre-emption rule, which provides that a federal statute will
not pre-empt a state statute enacted 'for the purpose of regulating the
business of insurance'-unless the federal statute 'specifically relates
to the business of insurance.'" Barnett Bank v. Nelson, 517 U.S. 25,
27-28 (1996) (emphasis omitted). Because permitting respondents to seek
treble damages under RICO neither precludes Nevada from enforcing its insurance
laws nor impedes petitioners from obeying them, RICO's treble damages remedy
does not pre-empt state law and does not "invalidate, impair, or supersede"
it within the meaning of Section 2(b).
B. Petitioners' effort to construe the terms "invalidate, impair, or
supersede" more broadly is inconsistent with the statutory text. In
essence, they argue that providing a greater remedy under RICO "impairs"
or "supersedes" state law by "'upset[ting] the balance' of
regulation * * * that the states have carefully constructed." Alliance
of Am. Insurers Br. at 26; see Pet. Br. 22-23. But Section 2(b) bars federal
statutes from being construed to "invalidate, impair, or supersede"
not merely laws "enacted * * * for the purpose of regulating the business
of insurance," but also "any law * * * which imposes a fee or
tax upon such business." 15 U.S.C. 1012(b). If federal law were to
"invalidate, impair, or supersede" state insurance regulation
merely because it imposes additional or greater liability for misconduct
than does state law, then federal law presumably would also "invalidate,
impair, or supersede" state insurance "fee[s] or tax[es]"
within the meaning of Section 2(b) whenever it imposes additional or greater
tax liability than does the State. Generally applicable federal fees and
taxes, however, do not "invalidate, impair, or supersede" state
insurance taxes and fees within the meaning of Section 2(b) where nothing
precludes insurers from paying both. For the same reason, generally applicable
federal sanctions for criminal misconduct, like those provided under RICO,
do not "invalidate, impair, or supersede" state insurance law
within the meaning of Section 2(b) if insurers can comply with both.
In addition, petitioners' construction effectively would make state insurance
law pre-empt the field of remedies for conduct that violates both state
and federal law. But Congress knew how to give state law such a pre-emptive
effect, and chose not to do so with respect to statutes such as RICO. Under
the second sentence of Section 2(b), the Sherman Act and other specifically-identified
statutes are "applicable to the business of insurance" only "to
the extent that such business is not regulated by State Law." 15 U.S.C.
1012(b) (emphasis added). Congress did not make state law pre-empt the field
with respect to statutes that, like RICO, were not specifically listed in
the second sentence of Section 2(b).
C. The ordinary and sensible presumption is that a federal law of general
applicability such as RICO applies uniformly to all persons whose conduct
falls within the statutory proscription. The rule of statutory construction
prescribed by the McCarran-Ferguson Act should not be distorted to create
disuniformities in the application of other Acts of Congress absent a showing
that the particular disuniformity is required to prevent a state insurance
law from actually being "invalidat[ed], impair[ed], or supersede[d]."
No such showing can be made here. Indeed, such a showing could not be made
even under an unduly expansive interpretation of those terms. Nevada state
law permits private actions for fraud and deceit in the insurance context,
and permits recovery of punitive damages that may well exceed the amount
that could be recovered under RICO. Since private actions in Nevada's own
courts co-exist with its system of insurance regulation, there is no reason
why RICO actions in federal courts cannot co-exist with that system as well.
ARGUMENT
THE McCARRAN-FERGUSON ACT DOES NOT PRECLUDE INJURED PERSONS FROM SEEKING
A FEDERAL REMEDY FOR A PATTERN OF CRIMINAL MAIL FRAUD PERPETRATED BY A MEDICAL
INSURER
"[T]he starting point in a case involving construction of the McCarran-Ferguson
Act, like the starting point in any case involving the meaning of a statute,
is the language of the statute itself." Department of Treasury v. Fabe,
508 U.S. 491, 500 (1993). The meaning of a statute, however, is not discerned
by examining "a single sentence or member of a sentence" in isolation,
but rather by "look[ing] to the provisions of the whole law, and to
its object and policy." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
51 (1987) (internal quotation marks omitted); see McCarthy v. Bronson, 500
U.S. 136, 139 (1991) ("[S]tatutory language must always be read in
its proper context.").
Section 2(b) of the McCarran-Ferguson Act, 15 U.S.C. 1012(b), provides in
relevant part:
No Act of Congress shall be construed to invalidate, impair, or supersede
any law enacted by any State for the purpose of regulating the business
of insurance, or which imposes a fee or tax upon such business, unless such
Act specifically relates to the business of insurance.
Because RICO does not "specifically relat[e] to the business of insurance,"
the issue in this case is the meaning of the phrase "invalidate, impair,
or supersede [state] law."
Relying on dictionary definitions, petitioners would give the terms "invalidate,"
"impair," and "supersede" a broad construction so as
to bar federal remedies that have some (unspecified) modicum of effect on
the business of insurance. But petitioners make no effort to determine the
legal source from which the terms "invalidate, impair, or supersede"
in Section 2(b) were drawn. Nor do they examine how those terms were used
and understood by lawmakers and the courts when the McCarran-Ferguson Act
was enacted. As a result, they overlook the most natural understanding of
the phrase "to invalidate, impair, or supersede [state] law"-that
it means, in modern parlance, "to pre-empt state law."
Thus, the McCarran-Ferguson Act does not declare that federal statutes shall
not be construed as affecting the business of insurance or its regulation.
Instead, it declares that general federal statutes should not be construed
as pre-empting state insurance laws. As this Court has explained, Section
2(b) is "a special federal anti-pre-emption rule, which provides that
a federal statute will not pre-empt a state statute enacted 'for the purpose
of regulating the business of insurance'-unless the federal statute 'specifically
relates to the business of insurance.'" Barnett Bank v. Nelson, 517
U.S. 25, 27-28 (1996) (emphasis omitted). Because permitting respondents
to pursue the federal remedies provided under RICO would not pre-empt Nevada's
insurance laws- Nevada remains free to enforce state law norms, and nothing
precludes petitioners from obeying them-RICO does not "invalidate,
impair, or supersede" state insurance law within the meaning of Section
2(b).
A. Federal Law Invalidates, Impairs, or Supersedes State Law Only If It
Pre-Empts State Law
1. Congress enacted the McCarran-Ferguson Act in response to this Court's
decision in United States v. South-Eastern Underwriters Ass'n, 322 U.S.
533 (1944), which held that the issuance of insurance is interstate commerce
and that, as a result, the practices of insurers are subject to scrutiny
under federal legislation, including the Sherman Act. 322 U.S. at 539-561;
see pp. 1-2, supra. The "decision provoked widespread concern that
the States would no longer be able to engage in taxation and effective regulation
of the insurance industry." St. Paul Fire & Marine, 438 U.S. at
539. As the dissenting opinions in South-Eastern Underwriters noted, under
the Court's holding, the Sherman Act would pre-empt the insurance laws of
several States: The "statutes of at least five states will be invalidated
by the decision as in conflict with the Sherman Act," Chief Justice
Stone explained, "and the argument in this Court reveals serious doubt
whether many others may not also be inconsistent with that Act." 322
U.S. at 581 (dissenting opinion). Moreover, according to the dissenting
opinions, the South-Eastern Underwriters decision might have made the Court's
dormant Commerce Clause cases applicable to the subject of insurance, thereby
precluding state taxation and regulation altogether. See ibid. (Stone, C.J.,
dissenting) ("The extent to which still other state statutes will now
be invalidated as in conflict with the commerce clause has not been explored.");
see also id. at 586-587 (Jackson, J., dissenting) (warning that Commerce
Clause has effect of "restricting state power").
Congress responded with the McCarran-Ferguson Act, 15 U.S.C. 1011 et seq.,
which declares that no federal statute "shall be construed to invalidate,
impair, or supersede any law enacted by any State for the purpose of regulating
the business of insurance" unless the federal statute specifically
relates to insurance. 15 U.S.C. 1012(b). Congress, however, did not choose
the words "invalidate, impair, or supersede" at random. Those
words had a familiar usage in this Court's decisions, and they were so utilized
in the dissenting opinions in South-Eastern Underwriters in particular.
Those opinions did not use the terms "invalidate," "impair,"
and "supersede" to describe mere indirect effects on state law,
or the proclivity of litigants to rely on federal rather than state remedies.
Instead, they used those terms to mean, in modern parlance, "pre-empt."
Indeed, the term "invalidate" apparently was drawn from Chief
Justice Stone's dissent, which warned that many state statutes "will
be invalidated by the [South-Eastern Underwriters] decision as in conflict
with the Sherman Act." 322 U.S. at 581 (emphasis added); see also id.
at 562 (opinion of the Court) (rejecting as "exaggerated" the
"argument that the Sherman Act necessarily invalidates many state laws").
And the terms "impair" and "supersede" appear to have
been drawn from Justice Jackson's dissenting opinion, which likewise used
them to mean "pre-empt." Under the Supremacy Clause, Justice Jackson
explained, Congress's exercise of its Commerce Clause powers "impairs
state regulation only in so far as it actually conflicts with the federal
regulation." 322 U.S. at 587 (emphasis added); see also ibid. (urging
an alternative rationale that "would leave the basis of state regulation
unimpaired"). And, Justice Jackson further warned, "if the present
trend" toward increasing the scope of what constitutes interstate commerce-over
which "congressional power to regulate prevails over that of the states"-continues,
"federal regulation eventually will supersede that of the states."
Id. at 586 (emphasis added).
The dissenting opinions' use of the terms "invalidate, impair, or supersede"
to mean "pre-empt" was consistent with then-prevailing legal usage.
When the McCarran-Ferguson Act was passed, the word "invalidate"
meant (as it does today) to "render of no force or effect." Webster's
New International Dictionary 1135 (1917). Consistent with that definition,
this Court regularly used the phrase "invalidate * * * law" to
describe pre-emption, declaring that, if a state law is in irreconcilable
conflict with or repugnant to federal law (whether statutory or constitutional),
it is "invalid" or "invalidated" thereby. See, e.g.,
Hines v. Davidowitz, 312 U.S. 52, 69 n.23 (1941) ("In the only case
of this type in which there was an outstanding treaty provision in conflict
with the state law, this Court held the state law invalid."); Todok
v. Union State Bank, 281 U.S. 449, 456 (1930) ("[T]he treaty did not
invalidate the provisions of the Nebraska statute."); Carpenters &
Joiners Union v. Ritter's Café, 315 U.S. 722, 734 (1942) (Reed, J.,
dissenting) ("legislation forbidding picketing * * * was invalidated"
as "unconstitutional"); Carter v. Virginia, 321 U.S. 131, 139
(1944) (Black, J., concurring) ("This Court could invalidate the Virginia
regulations, but only the Congress could devise and substitute effective
regulations to take their place.").3 Petitioners concede that the term
"invalidate" is best read as meaning "pre-empt." Pet.
Br. 20 (the term "invalidate" can "be equated with 'preempt'
and limited to * * * conflict between state and federal law").
Likewise, while the term "impair" by itself generally means "to
diminish in quantity, value, excellence, or strength," Webster's, supra,
at 1077, "or otherwise affect in an injurious manner," Black's
Law Dictionary 921 (3d ed. 1933), the phrase to "impair [a] law"
long has been uniquely associated with conflict pre-emption. The phrase
connotes partial pre-emption, i.e., the displacement of some portion of
a statute or its preclusion in certain contexts. Justice Jackson used the
phrase precisely in that manner in his South-Eastern Underwriters dissent:
When Congress exercises its Commerce Clause powers, he explained, "it
impairs state regulation only in so far as it actually conflicts with the
federal regulation." 322 U.S. at 587. And, at the time the McCarran-Ferguson
Act was passed, this Court used the phrase "impair * * * law"
in that sense as well. See, e.g., United States v. Waddill, Holland &
Flinn, Inc., 323 U.S. 353, 357 (1945) (state construction of local law "cannot
operate by itself to impair or supersede a long-standing Congressional declaration
of priority" for certain types of claims); Henry Ford & Son, Inc.
v. Little Falls Fibre Co., 280 U.S. 369, 378 (1930) ("[T]he powers
conferred by [the statute] on the Commission do not extend to the impairment
of the operation of those laws or to the extinguishment of rights acquired
under them."); Guaranty Trust Co. v. United States, 304 U.S. 126, 143
(1938) ("Even the language of a treaty wherever reasonably possible
will be construed so as not to override state laws or to impair rights arising
under them.").4 Indeed, at least one pre-McCarran-Ferguson Act statute
used the phrase "impair * * * law" to convey precisely that meaning,
and this Court interpreted the statute as declaring that federal law should
not pre-empt state regulation. Rice v. Board of Trade, 331 U.S. 247, 255
(1947) (section providing that federal statute shall not "be construed
to impair any [applicable] State law" shows that "Congress did
not preclude state regulation," and "serves the function of preventing
supersedure * * * where state and federal law overlap"); see also Shaw
v. Delta Air Lines, Inc., 463 U.S. 85, 101-102 (1983) ("pre-emption"
of cause of action and forum through which federal rights are enforced "impair[s]"
or "modif[ies]" federal law).5
The term "supersede" has a similar pedigree. In accordance with
its accepted definition-to "displace, or set aside, and put another
in place of; to supplant," Webster's, supra, at 2082-this Court consistently
used the term "supersede" in the context of state-federal relations
to mean "pre-empt," particularly where federal law not only bars
reliance on state law, but also provides a federal rule to operate in its
place. See, e.g., Illinois Commerce Comm'n v. Thomson, 318 U.S. 675, 682
(1943) ("[T]he Interstate Commerce Commission * * * has power to supersede
an intrastate rate by prescribing in its stead a new rate."); Midstate
Horticultural Co. v. Pennsylvania R.R., 320 U.S. 356, 359 (1943) ("Respondent
however insists the Act has not superseded, but has merely modified its
common law contractual right."); Allen-Bradley Local No. 1111 v. Wisconsin
Employment Relations Bd., 315 U.S. 740, 749 (1942) (as the "federal
system of alien registration" already had been "held to supersede
a state system of registration," the Court is "more ready to conclude
that a federal act in a field that touched international relations superseded
state regulation than * * * where a State [regulates] local matters");
J.I. Case Co. v. NLRB, 321 U.S. 332, 338 (1944) ("The very purpose
of providing by statute for the collective agreement is to supersede the
terms of separate agreements of employees."); Davies Warehouse Co.
v. Bowles, 321 U.S. 144, 152 (1944) ("[W]e think Congress did not intend
* * * to supersede the power of a state regulatory commission, exercising
comprehensive control."); District of Columbia v. Pace, 320 U.S. 698,
703 (1944) ("This general rule * * * would hardly supersede a special
statutory measure.").6
Because the South-Eastern Underwriters dissents used the terms "invalidate,"
"impair" and "supersede" law to convey the notion of
pre-emption-and because that was the prevailing legal usage at the time-it
is most natural to read the McCarran-Ferguson Act (which was specifically
addressed to that decision) as using those terms in the same sense. Where
Congress borrows legal terms from a particular source, it borrows their
meaning as well. United States v. Turley, 352 U.S. 407, 411 (1957) (common-law
terms construed consistent with their common-law meaning); Moskal v. United
States, 498 U.S. 103, 121 (1990) (Scalia, J., dissenting) ("[W]hen
a statute employs a term with a specialized legal meaning relevant to the
matter at hand, that meaning governs. * * * [A]s Justice Frankfurter more
poetically put it: '[I]f a word is obviously transplanted from another legal
source * * * it brings its soil with it.'"); see also United States
v. Wells, 519 U.S. 482 (1997).7
Thus, as this Court has recognized, Section 2(b) is "a special federal
anti-pre-emption rule, which provides that a federal statute will not pre-empt
a state statute enacted 'for the purpose of regulating the business of insurance'-unless
the federal statute 'specifically relates to the business of insurance.'"
Barnett Bank, 517 U.S. at 27-28 (emphasis omitted); see id. at 30 (referring
to "the McCarran-Ferguson Act's special anti-pre-emption rule");
Fabe, 508 U.S. at 496-497 (referring to 15 U.S.C. 1012 as "the anti-pre-emption
provisions of the McCarran-Ferguson Act"); Fabe, 508 U.S. at 515 (Kennedy,
J., dissenting) ("The first clause of §1012(b) * * * provides
that state laws enacted for the purpose of regulating the business of insurance
are saved from pre-emption."); id. at 510 (Kennedy, J., dissenting)
("[T]he McCarran-Ferguson Act * * * provides an exemption from pre-emption
for certain state laws."). That is also precisely how Senator Ferguson-whose
name the Act bears-characterized Section 2(b). The Act, Senator Ferguson
explained, "provides that no Federal legislation relating to interstate
commerce shall by implication repeal any existing State law unless such
act of Congress specifically so provides." 91 Cong. Rec. 483 (1945)
(emphasis added).8
2. The express declaration of purpose contained in Section 1 of the McCarran-Ferguson
Act, 15 U.S.C. 1011, confirms that Section 2(b) is best read as an anti-pre-emption
provision that prevents "repeal" of state insurance laws. Section
1 of the Act does not say that Congress seeks to avoid having any effect
on the insurance business. Instead, it declares that the States should not
be foreclosed from imposing their own regulations: "[T]he continued
regulation and taxation by the several States of the business of insurance
is in the public interest." 15 U.S.C. 1011. And it asserts that federal
enactments should not be read as precluding the States from doing so, absent
an expressed intent to the contrary: "[S]ilence on the part of the
Congress shall not be construed to impose any barrier to the regulation
or taxation of such business by the several States." 15 U.S.C. 1011.
Nothing in the Act's declaration of purpose evidences an intent to deprive
federal law of its usual force and effect where federal law does not "prevent
continued state regulation" and state and federal law can co-exist.
The Act's historical origin and purpose point in the same direction. The
McCarran-Ferguson Act was designed to address the specific concerns that
arose from the South-Eastern Underwriters decision. St. Paul Fire &
Marine, 438 U.S. at 538; Fabe, 508 U.S. at 499. That decision was considered
problematic not because federal law might impose additional duties-or taxes
or burdens-supplementing state law. Rather, many feared that federal law,
and the Commerce Clause, might be read to supplant or pre-empt state taxation
and regulation, as evidenced by the South-Eastern Underwriters dissents,
see pp. 11-13, supra, and the petitions for rehearing filed by the defendants
and the States.9 By declaring that federal law will not be construed as
pre-empting state law, Section 2(b) responds directly to those concerns,
"remov[ing] [the] obstructions [to continued state regulation and taxation]
which might be thought to flow from [Congress's] own power, whether dormant
or exercised, except as otherwise expressly provided." Prudential Ins.
Co. v. Benjamin, 328 U.S. 408, 429-430 (1946); see Wilburn Boat Co. v. Fireman's
Fund Ins. Co., 348 U.S. 310, 319 (1955) ("[T]he McCarran Act * * *
was designed to assure that existing state power to regulate insurance would
continue."); FTC v. Traveler's Health Ass'n, 362 U.S. 293, 299 (1960)
(similar). Indeed, given that each provision in the McCarran-Ferguson Act
is framed as a response to concerns raised by the South-Eastern Underwriters
dissents,10 it would be implausible to conclude that the Act sought to rectify
an alleged problem-the creation of supplementary federal remedies rather
than pre-emptive laws-that neither the Members of this Court nor the litigants
identified.
3. Because Section 2(b) effectively deprives many federal laws of potentially
pre-emptive effect on state insurance law, it forecloses most arguments
that state law is precluded by federal norms. It also forecloses application
of federal law (not addressed to insurance) that would irreconcilably conflict
with state law, i.e., that would necessarily have the effect of "pre-empting"
or "repealing" state insurance law. Thus, in Fabe, 508 U.S. at
502, this Court found "a direct conflict between [federal law] and
[state] law" where the two provided different priority rules for the
distribution of insurer assets, and applying one rule would necessarily
preclude the other. As the Court observed:
Ordinarily, a federal law supersedes any inconsistent state law. The first
clause of § 2(b) reverses this by imposing what is, in effect, a clear-statement
rule, a rule that state laws enacted 'for the purpose of regulating the
business of insurance' do not yield to conflicting federal statutes unless
a federal statute specifically requires otherwise.
Id. at 507 (emphasis added); see also Barnett Bank, 517 U.S. at 42 (where
general "federal statutes with potentially pre-emptive effect * * *
conflict with state [insurance] law" then "the McCarran-Ferguson
Act's anti-pre-emption rule will apply") (emphasis added).
Consequently, the First, Fifth, Seventh, and Ninth Circuits were correct
to conclude that, absent a direct conflict between state and federal law-such
that federal law would not supplement but rather would "pre-empt"
or "repeal" state insurance law-applying federal law to insurance-related
conduct does not "invalidate, impair, or supersede" state law
within the meaning of the Act. See Villafane-Neriz v. FDIC, 75 F.3d 727,
736 (1st Cir. 1996); United States v. Cavin, 39 F.3d 1299, 1305 (5th Cir.
1994); N.A.A.C.P. v. American Family Mut. Ins. Co., 978 F.2d 287, 295 (7th
Cir. 1992), cert. denied, 508 U.S. 907 (1993); Merchants Home Delivery Serv.,
Inc. v. Frank B. Hall & Co., 50 F.3d 1486, 1491-1492 (9th Cir. 1995),
cert. denied, 516 U.S. 964 (1995); see also Sabo v. Metropolitan Life Ins.
Co., 137 F.3d 185, 193 (3d Cir. 1998) (First, Seventh and Ninth Circuits
"look[] to a direct conflict in the substantive provisions of the federal
and state statutes at issue"), petition for cert. pending, No. 98-2.
Simply put, if federal law neither precludes application of state insurance
law nor impedes compliance therewith, it neither pre-empts state law nor
"invalidate[s], impair[s], or supersede[s]" that law within the
meaning of Section 2(b) of the McCarran-Ferguson Act, 15 U.S.C. 1012(b).
4. Judged by these standards, it is clear that permitting the victims of
a pattern of criminal mail fraud to pursue a treble damages remedy under
RICO does not "invalidate, impair, or supersede" Nevada insurance
law. Petitioners do not allege that RICO prohibits conduct that Nevada law
compels. Nor do they identify a Nevada law that will be rendered unenforceable
in whole or in part. To the contrary, they concede (as they must) that Nevada
law bars the conduct at issue in this case just as surely as federal law.
Because the dictates of federal and state law do not conflict, and because
nothing precludes petitioners from complying with both, Section 2(b) does
not bar respondents from seeking a treble damages remedy under federal law.
As Judge Easterbrook observed, anyone asserting that the McCarran-Ferguson
Act precludes reliance on federal law "needs to show that the [federal
law] conflicts with state law. Duplication is not conflict." American
Family, 978 F.2d at 295.
For similar reasons, this case cannot be meaningfully distinguished from
SEC v. National Securities, Inc., 393 U.S. 453 (1969). There, the Securities
and Exchange Commission sought to bar, under the federal securities laws,
the merger of two insurance companies even though state insurance regulators
had approved it. The question before the Court there, as here, was "whether
the McCarran-Ferguson Act bars a federal remedy which affects a matter subject
to state insurance regulation." 393 U.S. at 462. Although respondent
there argued "that any attempt to interfere with a merger approved
by state insurance officials would 'invalidate, impair, or supersede' the
state insurance laws," the Court rejected that argument:
Arizona has not commanded something which the Federal Government seeks to
prohibit. It has permitted respondents to consummate the merger; it did
not order them to do so. * * * The paramount federal interest in protecting
shareholders is in this situation perfectly compatible with the paramount
state interest in protecting policyholders. * * * In these circumstances,
we simply cannot see the conflict."
Id. at 463. The same reasoning applies here with even greater force. If
applying federal law to bar a transaction approved by state law does not
"invalidate, impair, or supersede" state law within the meaning
of the Act, it follows a fortiori that providing a federal remedy for conduct
that is similarly prohibited by state law does not either.
B. Petitioners' Construction Of Section 2(b) Is Inconsistent With The Statutory
Text, Structure, And Purpose
1. Ignoring the fact that Section 2(b) is most naturally read as a "special
anti-pre-emption provision," Barnett Bank, 517 U.S. at 27; Fabe, 508
U.S. at 496-497, petitioners and their amici argue that Section 2(b) precludes
private parties from relying on federal remedies that have a non-"trivial"
effect on the business of insurance or its regulation. Pet. Br. 24. Congress,
they assert, "intended to withdraw * * * from the field absent an express
congressional statement to the contrary." Pet. Br. 10; see Alliance
of Am. Insurers Br. at 12-13, 14-15; Consumer Credit Ins. Ass'n Br. at 7-9.
That argument, however, is contrary to statutory text. The Act does not
declare that "No Act of Congress shall apply to the business of insurance
unless such Act specifically relates thereto." It declares that general
federal statutes shall not be construed to "invalidate, impair, or
supersede" state insurance laws. 15 U.S.C. 1012(b).11
Petitioners accordingly attempt to give the terms "invalidate, impair,
or supersede" an over-broad construction. While conceding that the
term "invalidate" can "be equated with 'pre-empt' and limited
to * * * conflict[s] between state and federal law," Pet. Br. 20, petitioners
rely on dictionary definitions to argue that the words "impair"
and "supersede" can be read more broadly, id. at 20-21. But Congress
did not randomly pluck the terms "impair" and "supersede"
from the pages of a dictionary. It used those terms in light of their specific
connotation, as reflected in this Court's cases and the South-Eastern Underwriters
dissents. See pp. 12-17, supra. Those sources show that to "supersede"
or to "impair," when used in the phrase to "impair [state]
law" or to "supersede [state] law," means to "pre-empt."
Ibid. Any other construction would be at odds with the Act's express purpose
and historical context. See pp. 19-21, supra.12
2. Petitioners' over-broad theory of "impairment" and "supersession"
conflicts with the Act's text in two additional ways. Following the reasoning
of the Sixth and Eighth Circuits (rather than that of the First, Fifth,
Seventh, and Ninth), petitioners and their amici argue that providing a
greater remedy under RICO than under state law "impairs" or "supersedes"
state law by "'upset[ting] the balance' of regulation * * * that the
states have carefully constructed." Alliance of Am. Insurers Br. at
26; see Pet. Br. 22-23; Doe v. Norwest Bank Minnesota, N.A., 107 F.3d 1297,
1306-1307 (8th Cir. 1997); Kenty v. Bank One, Columbus, N.A., 92 F.3d 384,
392 (6th Cir. 1996). In essence, they argue, state law should be viewed
as pre-empting the field of remedies for insurance-related fraud. See Pet.
Br. 23-24 (relying on analogy to Garmon pre-emption); Alliance of Am. Insurers
Br. at 27-28.
Congress knew how to give state law such a broad pre-emptive effect, and
expressly did so with respect to the Sherman Act and certain other specifically-listed
federal statutes, but did not do so with respect to unlisted statutes such
as RICO. See pp. 3, 9, supra; see also FTC v. National Cas. Co., 357 U.S.
560, 564 (1958). Nor did Congress declare that federal law in general should
be inapplicable whenever the States have regulated. Those omissions are
presumed to be deliberate, see Gozlon-Peretz v. United States, 498 U.S.
395, 404 (1991), and in fact were, see 91 Cong. Rec. 486-488 (1945). Consequently,
those seeking to avoid the application of federal law generally cannot argue
simply that the State has regulated the field. Instead, as the Fourth Circuit
has explained, they must "point[] to a law enacted by [the State] which
would be 'impaired,'" invalidated, or superseded. "The presence
of a general regulatory scheme does not show that any particular state law
would be invalidated, impaired, or superseded." Mackey v. Nationwide
Ins. Co., 724 F.2d 419, 421 (4th Cir. 1984).
Moreover, Section 2(b) bars federal statutes from being construed to "invalidate,
impair, or supersede" not only "any law enacted * * * for the
purpose of regulating the business of insurance," but also "any
law * * * which imposes a fee or tax upon such business." 15 U.S.C.
1012(b). If federal law were to "invalidate, impair, or supersede"
state insurance regulation merely because it imposes additional or greater
liability for misconduct than does state law, then federal law presumably
also would "invalidate, impair, or supersede" state insurance
"fee[s] or tax[es]" within the meaning of Section 2(b) whenever
it imposes additional fees or greater tax liability than does the State.
Generally applicable federal taxes and fees may alter the amount that States
can collect from insurers; and no less than statutory liability for misconduct,
they may "upset the balance" of tax or fee burdens imposed on
insurers by state law. But, under our established federal system of dual
taxation, generally applicable federal fees and taxes do not "invalidate,
impair, or supersede" state insurance taxes and fees within the meaning
of Section 2(b) where nothing precludes insurers from paying both. For the
same reason, generally applicable federal sanctions for criminal misconduct,
like those provided under RICO, do not "invalidate, impair, or supersede"
state insurance regulations within the meaning of Section 2(b) so long as
insurers can comply with both. See Ratzlaff v. United States, 510 U.S. 135,
143 (1994) (single phrase in statute cannot be given two different meanings);
Cohen v. De La Cruz, 118 S. Ct. 1212, 1217 (1998) ("[E]quivalent words
have equivalent meaning when repeated in the same statute.").
3. Finally, the construction of "impairs" and "supersedes"
proposed by petitioners and their amici is undermined by its vagueness.
Under petitioners' construction, federal courts-rather than asking whether
federal law would effectively pre-empt or repeal a state statute-must engage
in indeterminate speculation about the effect federal remedies might have
on a "balance" of policies inferred from an overall state scheme.
It is difficult to judge what effects, if any, federal law has on state
regulation; it is not possible to articulate an objective test to determine
when the effects would be sufficient (or, as petitioners put it (Br. at
24), non-"trivial" enough) to warrant displacement of federal
law; and inferring the policies underlying state law-or the intent of the
state legislature with respect to pre-emption-is hazardous at best.13 Petitioners
here thus ask the Court to draw the dubious inference that, because Nevada
did not provide for treble damages under its own insurance laws, permitting
such a recovery under federal law would offend an unarticulated state policy.14
It is highly unlikely that Congress would have directed federal courts to
embark on such a perilous undertaking without offering any guidance. In
any event, the Act does not ask courts to look at state policy; it requires
them to determine whether applying a federal statute would "invalidate,
impair, or supersede any [state] law." 15 U.S.C. 1012(b) (emphasis
added). Because petitioners cannot identify a Nevada law that would suffer
such a fate, permitting respondents to seek treble damages under RICO does
not offend the rule of construction provided by Section 2(b).
C. RICO Does Not Invalidate, Impair, or Supersede Nevada Insurance Law Under
Any Construction Of Those Terms
Even if to "impair" or "supersede" a law were incorrectly
construed to mean "undermine" to some (unspecified) degree, or
to render "unnecessary" or "superfluous," RICO does
not have such an effect.
1. Contrary to the protestations of petitioners and their amici, Pet. Br.
20-21; Consumer Credit Ass'n Br. at 12-13, RICO does not supersede state
law by rendering it "superfluous." Even if respondents may proceed
under RICO, Nevada officials will continue to regulate the insurance industry
under their own system of law, not based on federal norms. Likewise, the
victims of insurance fraud will not abandon state remedies in favor of federal
law. RICO reaches only a small subset of the conduct covered by state insurance
laws; its greater remedies may be invoked only in exceptional cases where
the elements of a RICO violation can be proved-cases in which the defendant
has not merely committed a tort or regulatory violation, but has demonstrated
extreme culpability by conducting an "enterprise" through a "pattern"
of indictable criminal activity. 18 U.S.C. 1961, 1962.
Nor does RICO "impair" state law in any meaningful sense. Because
the alleged conduct barred by RICO in this case is also prohibited by Nevada's
insurance laws, RICO at most enhances vindication of state policy norms.
State regulators sometimes work with federal prosecutors or seek redress
under RICO themselves.15 Moreover, RICO does not, by "increasing the
probability that a state norm will be vindicated (or augmenting the damages
assessed in the event of violation)," conflict with a state policy
"that remedies should be limited or rare," American Family, 978
F.2d at 295; see Pet. Br. 23-24, or that administrative enforcement is preferred,
see Doe, 107 F.3d at 1306-1307. No such policies are expressed with the
requisite clarity (particularly with respect to a pattern of criminal conduct
that could constitute a RICO violation), and no representative of the State
appears before this Court so to claim.
Besides, Nevada's own law permits common-law actions for fraud and deceit
in the insurance context-allowing for punitive awards that may far exceed
actual damages in instances of malicious and oppressive misconduct-and expressly
allows private rights of actions based on violations of its insurance laws.
Pioneer Chlor Alkali Co. v. National Union Fire Ins. Co., 863 F. Supp. 1237,
1243 (D. Nev. 1994); Nev. Rev. Stat. § 686A.310.2 (1997). Because those
causes of action can "coexist" with the State's administrative
enforcement of its insurance regulations, "even though the same conduct
may be covered by both," there is "no reason why a federal private
right of action" under RICO "cannot coexist with" Nevada
insurance law as well. Sabo, 137 F.3d at 195.16
* * * * *
The ordinary and eminently sensible presumption is that a federal law of
general applicability such as RICO applies uniformly to all persons whose
conduct falls within the statutory proscription. Under our system of equal
justice under law, this is true regardless of the particular factual context
or the particular State in which the conduct occurs, so long as Congress
acts within its constitutional powers. The rule of statutory construction
prescribed by the McCarran-Ferguson Act should not be distorted to create
disuniformities in the application of other Acts of Congress-whether they
be employment, safety, environmental, or civil rights laws, or prohibitions
on criminal conduct-in the absence of a showing that the particular disuniformity
is required to prevent a "state law regulating the business of insurance"
from actually being "invalidate[d], impair[ed], or supersede[d]."
Because no such showing has been made here-RICO's treble damages provision
neither pre-empts nor effects a repeal of Nevada law-no disuniformity in
the application of federal law is warranted or authorized under Section
2(b).
CONCLUSION
The judgment of the court of appeals should be affirmed.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
FRANK W. HUNGER
Assistant Attorney General
LAWRENCE G. WALLACE
Deputy Solicitor General
JEFFREY A. LAMKEN
Assistant to the Solicitor
General
ANTHONY J. STEINMEYER
HOWARD S. SCHER
Attorneys
SEPTEMBER 1998
1 The original plaintiffs included not only the beneficiaries of the insurance
policies, but also their employers, who purchased the policies. Pet. App.
2a. The district court, however, granted summary judgment for petitioners
with respect to the employer/purchaser RICO claims, id. at 21a, 86a-87a,
89a-90a, and the court of appeals affirmed, id. at 26a-28a, 30a. Respondents
have not sought review of those decisions, and the claims of the employer/purchasers
thus are not before this Court.
2 The district court also granted summary judgment on a number of other
claims, none of which is before this Court.
3 See also Parker v. Brown, 317 U.S. 341, 361 (1943); Gwin, White &
Prince, Inc. v. Henneford, 305 U.S. 434, 446 (1939) (Black, J., dissenting).
4 See also New York, N.H. & H.R.R. v. State of New York, 165 U.S. 628,
631 (1897) ("[T]he mere grant to congress of the power to regulate
commerce with foreign nations and among the states did not * * * impair
the authority of the states to establish * * * regulations."); Peck
v. Jenness, 48 U.S. 612, 614 (1849) (state law liens "not to be annulled,
destroyed, or impaired under the proceedings in bankruptcy"); Corfield
v. Coryell, 6 F. Cas. 546 (E.D. Pa. 1823) (No. 3230) (Congress's power over
interstate commerce does not "impair the right of the state governments
to legislate.").
5 With respect to laws, "impair" also has been used to mean to
"conflict" sufficiently as to warrant pre-emption under the Supremacy
Clause. See Parker v. Brown, 317 U.S. 341, 368 (1943) (state regulation
valid because it "does not impair national control over the commerce
in a manner or to a degree forbidden by the Constitution"); Stone v.
Interstate Natural Gas Co., 103 F.2d 544, 550 (5th Cir. 1939). As demonstrated
above, however, Congress used the word "impair" in the McCarran-Ferguson
Act in the same sense that Justice Jackson used it in South-Eastern Underwriters,
i.e., to mean "pre-empt" in part. See also n.12, infra. In any
event, even if Congress used the term "impair" to mean "conflict"
in such a manner as to warrant pre-emption, it would not alter the conclusion
that federal law "invalidate[s], impair[s], or supersede[s]" state
insurance law within the meaning of Section 2(b) only if the two directly
conflict. See Northwest Cent. Pipeline Corp. v. State Corp. Comm'n, 489
U.S. 493, 509 (1989) (State law "conflicts with federal law" where
"it is impossible to comply with both" or "state law stands
as an obstacle to the accomplishment and execution of congressional objectives.");
N.A.A.C.P. v. American Family Mut. Ins. Co., 978 F.2d 287, 295-297 (7th
Cir. 1992), cert. denied, 508 U.S. 907 (1993).
6 Petitioners are incorrect to assert (Pet. Br. 17) that so construing Section
2(b) renders the terms "impair" and "supersede" mere
surplusage. To the contrary, each word in the phrase "invalidate, impair,
or supersede" has a slightly different connotation, and only collectively
do they encompass the concept of pre-emption. The term "invalidate"
means to render ineffective, generally without providing a replacement rule
or law. See Carter, 321 U.S. at 139 (Black, J., concurring) ("This
Court could invalidate the Virginia regulations, but only the Congress could
devise and substitute effective regulations to take their place.").
The term "supersede" means to displace (and thus render ineffective)
while providing a substitute rule. See Webster's, supra, at 2082; Illinois
Commerce Comm'n, 318 U.S. at 682 (The ICC "has power to supersede an
intrastate rate by prescribing in its stead a new rate."). And the
term "impair" is associated with partial pre-emption that displaces
a state scheme only in certain contexts or respects. See 322 U.S. at 587
(Jackson, J., dissenting) (federal statute "impairs state regulation
only in so far as it actually conflicts with the federal regulation").
In any event, to the extent the meanings of the terms overlap, the rule
that each word must be construed to have meaning and effect does not apply
to instances of lawyerly iteration. See Moskal v. United States, 498 U.S.
103, 120 (1990) (Scalia, J., dissenting) ("Nor should [the superfluity
principle] be applied to the obvious instances of iteration to which lawyers,
alas, are particularly addicted.").
7 It is not significant that Congress did not use the term "pre-empt."
That term did not in 1945 have its current breadth of meaning or widespread
use; none of the opinions in South-Eastern Underwriters used it. Our research
indicates that "pre-empt" was not used in this Court's cases to
mean displacement of state law until 1917, when Justice Brandeis used the
phrase "pre-empt[] the whole field" in dissent in New York Central
R.R. v. Winfield, 244 U.S. 147, 169; the majority, however, used the word
"supersede," id. at 148 ("[S]tate laws covering the same
field are necessarily superseded."). The term pre-empt appears occasionally
in cases from the late 1930s and early 1940s, but appears confined to the
concept of "field pre-emption." See, e.g., Puerto Rico v. Shell
Co., 302 U.S. 253, 260 (1937) ("act of Congress" had not "preëmpted
the ground occupied by the local act and superseded it"); Faitoute
Co. v. Asbury Park, 316 U.S. 502, 507 (1942) (rejecting argument that a
particular "field of lawmaking has been preempted"); Rice v. Santa
Fe Elevator Corp., 331 U.S. 218, 237 (1947) (Congress had not moved "into
these fields" and "pre-empted" them). We have found no indication
that the Court began using the word "pre-empt" to describe what
we now call conflict pre-emption and express pre-emption until the mid 1950s,
see, e.g., Weber v. Anheuser-Busch, Inc., 348 U.S. 468, 480 (1955) (although
the "areas that have been pre-empted * * * are not" easily delineated,
"[o]bvious conflict, actual or potential, leads to easy judicial exclusion
of state action"); San Diego Unions v. Garmon, 359 U.S. 236, 240 (1959)
(similar), or the specific labels "express pre-emption" and "conflict
pre-emption" until 1973 and 1989, see City of Burbank v. Lockheed Air
Terminal, 411 U.S. 624, 636 (1973) ("express pre-emption section");
Northwest Cent. Pipeline v. State Corp. Comm'n, 489 U.S. 493, 515 (1989)
("conflict pre-emption analysis").
8 That is how Senator Ferguson's colleagues understood the provision as
well. 91 Cong. Rec. 485 (1945) (describing the bill as declaring that "No
act of Congress shall ever presume to invalidate a State law on the subject
of insurance") (Sen. Taft); id. at 486 ("The section before us
provides that no act of Congress shall be construed to invalidate a State
law unless the act of Congress specifically states that the State law is
in conflict with the Federal act and is designed to override it.")
(Sen. Revercomb); id. at 1090 ("The methods of control exercised by
the States and by the Federal Government are conflicting, and the sole purpose
of this bill is to take out as much of that conflict as possible.")
(Rep. Gwynne).
9 Petition for Rehearing at 7, South-Eastern Underwriters, supra ("[T]he
effect of the decision is not only to call into question state statutes
which are inconsistent with the Sherman Act, but also to place all existing
state regulation of insurance in jeopardy."); Petition of the State
of New York in Support of Motion for Rehearing at 1 ("This Court's
decision that insurance is commerce creates problems without foreseeable
limit concerning the effect of Federal statutes and concerning the extent
to which State regulations are now permissible.").
10 In response to the concern that the Commerce Clause might be read as
precluding state regulation of insurance entirely, see pp. 2, 12, supra,
Section 2(a) of the Act delegates the national power over interstate insurance
to the States. 15 U.S.C. 1012(a). To address the immediate effect of the
antitrust laws (and other specifically identified statutes) on state law,
see 322 U.S. at 581 (Stone, C.J., dissenting); pp. 2, 12-13, supra, Congress
declared a partial moratorium on their application to the business of insurance
for four years, and limited their applicability thereafter. See p. 3, supra;
15 U.S.C. 1013(a) and (b); 15 U.S.C. 1012(b). Finally, to address the possibility
that state law might be pre-empted by other, unidentified, federal statutes,
see n.9, supra, Congress declared that no federal statute should be read
to pre-empt-or, in the language of those times, to "invalidate, impair,
or supersede"-state insurance law absent a clear indication that Congress
so intended. 15 U.S.C. 1012(b).
11 The floor statement of Representative Gwynne on which petitioners repeatedly
rely for the proposition that Congress sought to remove itself from the
field entirely, Pet. Br. 14 n.9, 18 n.10, cannot be reconciled with Section
2(b)'s text. Indeed, Representative Gwynne himself recognized that Section
2(b) did not render federal law inoperative as a general matter, but rather
did so only in cases of conflict. 91 Cong. Rec. 1090 (1945) ("The methods
of control exercised by the States and by the Federal Government are conflicting,
and the sole purpose of this bill is to take out as much of that conflict
as possible."). Besides, it is settled law that the McCarran-Ferguson
Act did not return the law to its pre-South-Eastern Underwriters state.
Fabe, 508 U.S. at 507; Group Life & Health Ins. Co. v. Royal Drug Co.,
440 U.S. 205, 220 (1979).
12 Even if "impair * * * law" could be given a more expansive
meaning than pre-empt, the fact that "invalidate" and "supersede"
so clearly connote pre-emption make it appropriate to interpret "impair"
in that sense as well. "The traditional canon of construction, noscitur
a sociis, dictates that words grouped in a list should be given a related
meaning." Dole v. United Steelworkers, 494 U.S. 26, 35 (1989) (internal
quotation marks omitted)). In any event, the most plausible alternative
legal meaning for the phrase to "impair * * * law" is to affect
in such an injurious manner as to warrant pre-emption under the doctrine
of conflict pre-emption. See n.5, supra. That construction would lead to
the same result we urge here. Ibid.
13 Thus, the Sixth Circuit has decided that permitting jury trials, attorney's
fees awards, and punitive damages awards under the Fair Housing Act does
not impair Ohio insurance law, Nationwide Mut. Ins. Co. v. Cisneros, 52
F.3d 1351 (1995), cert. denied, 516 U.S. 1140 (1996), but that RICO's treble
damages and attorney's fees provision does, Kenty, 92 F.3d at 392. In doing
so, it has not articulated a legal standard that could not be utilized to
reach the opposite conclusions.
14 To the extent petitioners or their amici rely on the preamble to Nevada's
insurance laws, see, e.g., Consumer Credit Ins. Ass'n Br. at 10, their submission
is unpersuasive. The preamble is addressed to the provision of the McCarran-Ferguson
Act that renders the antitrust laws and other specifically-identified federal
laws inapplicable in part if the State has regulated the insurance business,
see pp. 3, 9, 25-26, supra. It has no bearing on whether a federal law would
"invalidate, impair, or supersede" state law within the meaning
of Section 2(b).
15 See, e.g., United States v. Employee Ins. Servs., Civ. No. 1-93-CV-181
(N.D. Ga., filed Jan. 27, 1989) (injunctive action brought with cooperation
of state regulators); Schacht v. Brown, 711 F.2d 1343 (7th Cir.) (suit by
Acting Director of Insurance of the State of Illinois as liquidator of insolvent
insurer), cert. denied, 464 U.S. 1002 (1983); Kaiser v. Stewart, 965 F.
Supp. 684 (E.D. Pa. 1997) (similar suit); North Carolina v. Alexander &
Alexander Servs., Inc., 680 F. Supp. 746 (E.D.N.C. 1988) (similar suit).
16 As we explained in our amicus brief at the petition stage (at pp. 17-19),
even if the McCarran-Ferguson Act precluded private parties from seeking
treble damages-and it does not-neither civil nor criminal actions brought
by the United States would be barred. To the contrary, the courts of appeals
unanimously agree that government actions would remain permissible because
the United States does not seek to remedy private harm, but to vindicate
its sovereign interest in ensuring that the federal mails and other means
of communication are not put to improper use; the United States need not
rely on state law remedies to vindicate its sovereign interests.