AMERICAN INSURANCE ASSOCIATION, et al., PETITIONERS v. JOHN GARAMENDI, INSURANCE COMMISSIONER, STATE OF CALIFORNIA
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
June 23, 2003
Justice Souter delivered the opinion of the Court.
California’s Holocaust Victim Insurance Relief Act of 1999 requires any insurer doing business in that State to disclose information about all policies sold in Europe between 1920 and 1945 by the company itself or any one “related” to it. The issue here is whether HVIRA interferes with the National Government’s conduct of foreign relations. We hold that it does, with the consequence that the state statute is preempted.
The Nazi Government of Germany engaged not only in genocide and enslavement but theft of Jewish assets, including the value of insurance policies, and in particular policies of life insurance, a form of savings held by many Jews in Europe before the Second World War. Early on in the Nazi era, loss of livelihood forced Jews to cash in life insurance policies prematurely, only to have the government seize the proceeds of the repurchase, and many who tried to emigrate from Germany were forced to liquidate insurance policies to pay the steep “flight taxes” and other levies imposed by the Third Reich to keep Jewish assets from leaving the country. Before long, the Reich began simply seizing the remaining policies outright. In 1941, the 11th Decree of the Reich Citizenship Law declared the confiscation of assets (including insurance policies) of Jews deported to the concentration camps, and two years later the 13th Decree did the same with respect to property of the dead, each decree requiring banks and insurance companies to identify Jewish accounts and transmit the funds to the Reich treasury. After the war, even a policy that had escaped confiscation was likely to be dishonored, whether because insurers denied its existence or claimed it had lapsed from unpaid premiums during the persecution, or because the government would not provide heirs with documentation of the policyholder’s death. Responsibility as between the government and insurance companies is disputed, but at the end of the day, the fact is that the value or proceeds of many insurance policies issued to Jews before and during the war were paid to the Reich or never paid at all.
These confiscations and frustrations of claims fell within the subject of reparations, which became a principal object of Allied diplomacy soon after the war. At the Potsdam Conference, the United States, Britain, and the Soviet Union took reparations for wartime losses by seizing industrial assets from their respective occupation zones, putting into effect the plan originally envisioned at the Yalta Conference months before.....
As for insurance claims specifically, both countries agreed that the German Foundation would work with the International Commission on Holocaust Era Insurance Claims (ICHEIC), a voluntary organization formed in 1998 by several European insurance companies, the State of Israel, Jewish and Holocaust survivor associations, and the National Association of Insurance Commissioners, the organization of American state insurance commissioners. The job of the ICHEIC includes negotiation with European insurers to provide information about unpaid insurance policies issued to Holocaust victims and settlement of claims brought under them.....
In the pact with the United States, Germany stipulated that “insurance claims that come within the scope of the current claims handling procedures adopted by the [ICHEIC] and are made against German insurance companies shall be processed by the companies and the German Insurance Association on the basis of such procedures and on the basis of additional claims handling procedures that may be agreed among the Foundation, ICHEIC, and the German Insurance Association.”
While these international efforts were underway, California’s Department of Insurance began its own enquiry into the issue of unpaid claims under Nazi-era insurance policies, prompting state legislation designed to force payment by defaulting insurers. In 1998, the state legislature made it an unfair business practice for any insurer operating in the State to “fai[l] to pay any valid claim from Holocaust survivors.” The legislature placed “an affirmative duty” on the Department of Insurance “to play an independent role in representing the interests of Holocaust survivors,” including an obligation to “gather, review, and analyze the archives of insurers … to provide for research and investigation” into unpaid insurance claims.
State legislative efforts culminated the next year with passage of Assembly
Bill No. 600, the first section of which amended the State’s Code of Civil
Procedure to allow state residents to sue in state court on insurance claims
based on acts perpetrated in the Holocaust and extended the governing statute
of limitations to December 31, 2010. The section of the bill codified as
HVIRA, at issue here, requires “[a]ny insurer currently doing business
in the state” to disclose the details of “life, property, liability, health,
annuities, dowry, educational, or casualty insurance policies” issued “to
persons in Europe, which were in effect
between 1920 and 1945.”
HVIRA was meant to enhance enforcement of both the unfair business practice
provision and the provision for suit on the policies in question by “ensur[ing]
that any involvement [that licensed California insurers] or their related
companies may have had with insurance policies of Holocaust victims are
[sic] disclosed to the state.”While the legislature acknowledged that “[t]he
international Jewish community is in active negotiations with responsible
insurance companies through the [ICHEIC] to resolve all outstanding insurance
claims issues,” it still thought the Act “necessary to protect the claims
and interests of California residents, as well as to encourage the development
of a resolution to these issues through the international process or through
direct action by the State of California, as necessary.....”
Several American and European insurance companies and the American Insurance Association (a national trade association), filed suit for injunctive relief against respondent insurance commissioner of California, challenging the constitutionality of HVIRA..... .
The principal argument for preemption made by petitioners and the United States as amicus curiae is that HVIRA interferes with foreign policy of the Executive Branch, as expressed principally in the executive agreements with Germany, Austria, and France. The major premises of the argument, at least, are beyond dispute. There is, of course, no question that at some point an exercise of state power that touches on foreign relations must yield to the National Government’s policy, given the “concern for uniformity in this country’s dealings with foreign nations” that animated the Constitution’s allocation of the foreign relations power to the National Government in the first place.
Nor is there any question generally that there is executive authority to decide what that policy should be. Although the source of the President’s power to act in foreign affairs does not enjoy any textual detail, the historical gloss on the “executive Power” vested in Article II of the Constitution has recognized thePresident’s “vast share of responsibility for the conduct of our foreign relations.” Youngstown Sheet & Tube Co. v. Sawyer (1952). While Congress holds express authority to regulate public and private dealings with other nations in its war and foreign commerce powers, in foreign affairs the President has a degree of independent authority to act.
At a more specific level, our cases have recognized that the President has authority to make “executive agreements” with other countries, requiring no ratification by the Senate or approval by Congress, this power having been exercised since the early years of the Republic....
Generally, valid executive agreements are fit to preempt state law, just as treaties are, and if the agreements here had expressly preempted laws like HVIRA, the issue would be straightforward. But petitioners and the United States as amicus curiae both have to acknowledge that the agreements include no preemption clause, and so leave their claim of preemption to rest on asserted interference with the foreign policy those agreements embody....
The Zschernig majority relied on statements in a number of previous cases open to the reading that state action with more than incidental effect on foreign affairs is preempted, even absent any affirmative federal activity in the subject area of the state law, and hence without any showing of conflict.... Likewise, Justice Stewart’s concurring opinion viewed the Oregon statute as intruding “into a domain of exclusively federal competence.” Justice Harlan, joined substantially by Justice White, disagreed with the Zschernig majority on this point, arguing that its implication of preemption of the entire field of foreign affairs was at odds with some other cases suggesting that in the absence of positive federal action “the States may legislate in areas of their traditional competence even though their statutes may have an incidental effect on foreign relations.” Thus, for Justice Harlan it was crucial that the challenge to the Oregon statute presented no evidence of a “specific interest of the Federal Government which might be interfered with” by the law. He would, however, have found preemption in a case of “conflicting federal policy,” and on this point the majority and Justices Harlan and White basically agreed: state laws “must give way if they impair the effective exercise of the Nation’s foreign policy.”
It is a fair question whether respect for the executive foreign relations power requires a categorical choice between the contrasting theories of field and conflict preemption evident in the Zschernig opinions,but the question requires no answer here. For even on Justice Harlan’s view, the likelihood that state legislation will produce something more than incidental effect in conflict with express foreign policy of the National Government would require preemption of the state law. And since on his view it is legislation within “areas of … traditional competence” that gives a State any claim to prevail, it would be reasonable to consider the strength of the state interest, judged by standards of traditional practice, when deciding how serious a conflict must be shown before declaring the state law preempted. Judged by these standards, we think petitioners and the Government have demonstrated a sufficiently clear conflict to require finding preemption here.
To begin with, resolving Holocaust-era insurance claims that may be held by residents of this country is a matter well within the Executive’s responsibility for foreign affairs. Since claims remaining in the aftermath of hostilities may be “sources of friction” acting as an “impediment to resumption of friendly relations” between the countries involved, there is a “longstanding practice” of the national Executive to settle them in discharging its responsibility to maintain the Nation’s relationships with other countries. The issue of restitution for Nazi crimes has in fact been addressed in Executive Branch diplomacy and formalized in treaties and executive agreements over the last half century....Vindicating victims injured by acts and omissions of enemy corporations in wartime is thus within the traditional subject matter of foreign policy in which national, not state, interests are overriding, and which the National Government has addressed.
The exercise of the federal executive authority means that state law must give way where, as here, there is evidence of clear conflict between the policies adopted by the two. The foregoing account of negotiations toward the three settlement agreements is enough to illustrate that the consistent Presidential foreign policy has been to encourage European governments and companies to volunteer settlement funds in preference to litigation or coercive sanctions....
California has taken a different tack of providing regulatory sanctions to compel disclosure and payment, supplemented by a new cause of action for Holocaust survivors if the other sanctions should fail. HVIRA’s economic compulsion to make public disclosure, of far more information about far more policies than ICHEIC rules require, employs “a different, state system of economic pressure,” and in doing so undercuts the President’s diplomatic discretion and the choice he has made exercising it. Whereas the President’s authority to provide for settling claims in winding up international hostilities requires flexibility in wielding “the coercive power of the national economy” as a tool of diplomacy, HVIRA denies this, by making exclusion from a large sector of the American insurance market the automatic sanction for noncompliance with the State’s own policies on disclosure. “Quite simply, if the [California] law is enforceable the President has less to offer and less economic and diplomatic leverage as a consequence.”
The express federal policy and the clear conflict raised by the state statute are alone enough to require state law to yield. If any doubt about the clarity of the conflict remained, however, it would have to be resolved in the National Government’s favor, given the weakness of the State’s interest, against the backdrop of traditional state legislative subject matter, in regulating disclosure of European Holocaust-era insurance policies in the manner of HVIRA....
But should the general standard not be displaced, and the State’s interest recognized as a powerful one, by virtue of the fact that California seeks to vindicate the claims of Holocaust survivors? The answer lies in recalling that the very same objective dignifies the interest of the National Government in devising its chosen mechanism for voluntary settlements, there being about 100,000 survivors in the country, only a small fraction of them in California. As against the responsibility of the United States of America, the humanity underlying the state statute could not give the State the benefit of any doubt in resolving the conflict with national policy.
The basic fact is that California seeks to use an iron fist where the President has consistently chosen kid gloves. We have heard powerful arguments that the iron fist would work better, and it may be that if the matter of compensation were considered in isolation from all other issues involving the European allies, the iron fist would be the preferable policy. But our thoughts on the efficacy of the one approach versus the other are beside the point, since our business is not to judge the wisdom of the National Government’s policy; dissatisfaction should be addressed to the President or, perhaps, Congress. The question relevant to preemption in this case is conflict, and the evidence here is “more than sufficient to demonstrate that the state Act stands in the way of [the President’s] diplomatic objectives.”
Justice Ginsburg, with whom Justice Stevens, Justice Scalia, and Justice Thomas join, dissenting.
Responding to Holocaust victims’ and their descendents’ long-frustrated efforts to collect unpaid insurance proceeds, California’s Holocaust Victim Insurance Relief Act of 1999 requires insurance companies operating in the State to disclose certain information about insurance policies they or their affiliates wrote in Europe between 1920 and 1945. In recent years, the Executive Branch of the Federal Government has become more visible in this area, undertaking foreign policy initiatives aimed at resolving Holocaust-era insurance claims. Although the federal approach differs from California’s, no executive agreement or other formal expression of foreign policy disapproves state disclosure laws like the HVIRA. Absent a clear statement aimed at disclosure requirements by the “one voice” to which courts properly defer in matters of foreign affairs, I would leave intact California’s enactment.....
The Court depicts Allied diplomacy after World War II as aimed in part at settling confiscated and unpaid insurance claims. But the multilateral negotiations that produced the Potsdam, Yalta, and like accords failed to achieve any global resolution of such claims..... In the late 1990s, litigation in American courts provided a spur to action. Holocaust survivors and their descendents initiated class-action suits against German and other European firms seeking compensation for, inter alia, the confiscation of Jewish bank assets, the use of Jewish slave labor, and the failure to pay Jewish insurance claims.
In the insurance industry, the litigation propelled a number of European companies to agree on a framework for resolving unpaid claims outside the courts. This concord prompted the 1998 creation of the International Commission on Holocaust Era Insurance Claims (ICHEIC). A voluntary claims settlement organization, ICHEIC comprises several European insurers, Jewish and Holocaust survivor organizations, the State of Israel, and this country’s National Association of Insurance Commissioners....
ICHEIC has thus far settled only a tiny proportion of the claims it has received..... Finally, although ICHEIC has directed its members to publish lists of unpaid Holocaust-era policies, that non-binding directive had not yielded significant compliance at the time this case reached the Court.....
California’s disclosure law, the HVIRA, was enacted a year after ICHEIC’s formation. Observing that at least 5,600 documented Holocaust survivors reside in California, the HVIRA declares that “[i]nsurance companies doing business in the State of California have a responsibility to ensure that any involvement they or their related companies may have had with insurance policies of Holocaust victims [is] disclosed to the state.” The Commissioner is further directed to suspend the license of any insurer that fails to comply with the HVIRA’s reporting requirements. §13806.
These measures, the HVIRA declares, are “necessary to protect the claims and interests of California residents, as well as to encourage the development of a resolution to these issues through the international process or through direct action by the State of California, as necessary.” Information published in the HVIRA’s registry could, for example, reveal to a Holocaust survivor residing in California the existence of a viable claim, which she could then present to ICHEIC for resolution.....
The Federal Government, after prolonged inaction, has responded to the Holocaust-era insurance issue by diplomatic means. Executive agreements with Germany, Austria, and France, the Court observes, are the principal expressions of the federal approach..... The German Foundation Agreement commits the Federal Government to certain conduct. It provides, for example, that when a German company is sued in a United States court on a Holocaust-era claim, the Federal Government will file with the court a statement that “the President of the United States has concluded that it would be in the foreign policy interests of the United States for the [German] Foundation to be the exclusive forum and remedy for the resolution of all asserted claims against German companies arising from their involvement in the National Socialist era and World War II.”
The President’s primacy in foreign affairs, I agree with the Court, empowers him to conclude executive agreements with other countries. Our cases do not catalog the subject matter meet for executive agreement, but we have repeatedly acknowledged the President’s authority to make such agreements to settle international claims. And in settling such claims, we have recognized, an executive agreement may preempt otherwise permissible state laws or litigation....
[Our prior cases] confirm that executive agreements directed at claims settlement may sometimes preempt state law. The Court states that if the executive “agreements here had expressly preempted laws like HVIRA, the issue would be straightforward.” One can safely demur to that statement, for, as the Court acknowledges, no executive agreement before us expressly preempts the HVIRA. Indeed, no agreement so much as mentions the HVIRA’s sole concern: public disclosure.
Despite the absence of express preemption, the Court holds that the HVIRA interferes with foreign policy objectives implicit in the executive agreements. I would not venture down that path....
The notion of “dormant foreign affairs preemption” resonates most audibly when a state action “reflect[s] a state policy critical of foreign governments and involve[s] ‘sitting in judgment’ on them.” The HVIRA entails no such state action or policy. It takes no position on any contemporary foreign government and requires no assessment of any existing foreign regime. It is directed solely at private insurers doing business in California, and it requires them solely to disclose information in their or their affiliates’ possession or control.....
If it is uncertain whether insurance litigation may continue given the executive agreements on which the Court relies, it should be abundantly clear that those agreements leave disclosure laws like the HVIRA untouched.... Here, the Court invalidates a state disclosure law on grounds of conflict with foreign policy “embod[ied]” in certain executive agreements, although those agreements do not refer to state disclosure laws specifically, or even to information disclosure generally. It therefore is surely an exaggeration to assert that the “HVIRA threatens to frustrate the operation of the particular mechanism the President has chosen” to resolve Holocaust-era claims. If that were so, one might expect to find some reference to laws like the HVIRA in the later-in-time executive agreements. There is none....
Sustaining the HVIRA would not compromise the President’s ability to speak with one voice for the Nation. To the contrary, by declining to invalidate the HVIRA in this case, we would reserve foreign affairs preemption for circumstances where the President, acting under statutory or constitutional authority, has spoken clearly to the issue at hand. “[T]he Framers did not make the judiciary the overseer of our government.” And judges should not be the expositors of the Nation’s foreign policy, which is the role they play by acting when the President himself has not taken a clear stand. As I see it, courts step out of their proper role when they rely on no legislative or even executive text, but only on inference and implication, to preempt state laws on foreign affairs grounds.
In sum, assuming, arguendo, that an executive agreement or similarly formal foreign policy statement targeting disclosure could override the HVIRA, there is no such declaration here. Accordingly, I would leave California’s enactment in place....
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