AMERICAN INSURANCE ASSOCIATION v. GARAMENDI
In 1999 the California legislature enacted the Holocaust Victim Insurance Relief Act (HVIRA) in an attempt to facilitate Holocaust-era insurance claims by California residents. The Act required all insurance companies doing business in California that sold policies to people in Europe between 1920 and 1945 to make public all of those policies, including the names of policy owners and the status of the policies. A group of insurance companies and a trade organization sued, saying that only the federal government, with its jurisdiction over commerce and foreign affairs, had the right to enact such legislation. They also said the law violated the Due Process and Equal Protection clauses of the U.S. Constitution because the companies, if they failed to comply, could lose their insurance licenses. The District Court ruled for the insurance companies; the 9th Circuit Court of Appeals reversed.
Did California's passage of the HVIRA interfere with the federal government's sovereignty over foreign affairs established by Article I of the Constitution?
Legal provision: Article 2, Section 1: Executive Power
Yes. In a 5-4 opinion delivered by Justice David H. Souter, the Court held that California's HVIRA interferes with the president's ability to conduct the nation's foreign policy and is therefore preempted. The Court reasoned that an exercise of state power that concerns foreign relations must yield to the Federal Government's policy or that generally there is executive authority to decide what policy should be implemented. Based on an account of related international negotiations, the Court found sufficiently clear conflict between HVIRA and the President's foreign policy. "The basic fact is that California seeks to use an iron fist where the President has consistently chosen kid gloves," wrote Justice Souter. Justice Ruth Bader Ginsburg, joined by Justices John Paul Stevens, Antonin Scalia, and Clarence Thomas, dissented, arguing that no executive agreement or other formal expression of foreign policy expressly disapproved of state disclosure laws like California's HVIRA.
Argument of Kenneth S. Geller
Chief Justice Rehnquist: We'll hear argument now in Number 027-22, American Insurance Association versus John Garamendi.
Mr. Geller: Thank you, Mr. Chief Justice, may it please the Court:
58 years ago almost to the day the United States and its allies defeated Nazi Germany and World War II came to an end in Europe.
Ever since that time, the United States Government has been actively engaged in a series of initiatives to obtain just compensation for victims of the war.
These efforts continue to the present day.
Beginning in the mid-1990s, the Federal Government has been engaged in extensive negotiations with other Governments concerning claims of Holocaust victims.
The President himself has stated repeatedly that it's in the foreign policy interests of the United States to have these claims resolved exclusively in an international forum and through nonadversarial means, rather than through costly, time-consuming and contentious litigation.
To achieve these goals in the context of unpaid insurance claims, the President has taken three actions.
First, the United States has facilitated and encouraged the establishment of the International Commission on Holocaust Era Insurance Claims, or ICHEIC.
Second, the United States, with the personal intervention of the President himself, has negotiated agreements with Germany and Austria under which those countries and their insurance companies agreed to provide hundreds of millions of dollars in compensation for unpaid insurance claims and to follow procedures worked out with ICHEIC to process insurance claims in a nonadversarial manner and under relaxed standards of proof, and--
Justice O'Connor: Mr. Geller, I... let me mention a couple of things that I find troubling about the case, and one is that when Congress passed a law in this area it didn't include any language preempting State laws such as California has, and when the President put out his executive order or agreement it doesn't expressly do so, either.
How does that affect our analysis, do you think?
Mr. Geller: --Well, the statute that Congress passed was the Holocaust Assets--
Justice O'Connor: Yes, right.
Mr. Geller: --Commission Act, which clearly gave authority to the President to take control of this issue, and didn't provide any role for the States whatsoever.
Justice O'Connor: But it didn't preclude a role.
Mr. Geller: But in the area of foreign affairs, under this Court's decision in Zschernig, and in the area of foreign commerce under many of this Court's decisions--
Justice O'Connor: Well, Zschernig has never been cited since it was written.
It's kind of a troublesome thing to hang your whole--
Mr. Geller: --Our whole case does not depend on Zschernig--
Justice O'Connor: --case on, and we have in the meantime decided, for instance, Barclay's Bank, which has some language in it that speaks against recognizing the kind of--
Mr. Geller: --I don't--
Justice O'Connor: --authority you talk about, and we have the Breard case, that criminal case, Breard versus Greene.
Now, how do we deal with those?
Mr. Geller: --Well, to begin with I think Barclay's is completely distinguishable, Justice O'Connor, on at least three grounds.
First, Barclay's concerns solely the Foreign Commerce Clause, and the Court said in Barclay's that Congress has primacy under the Foreign Commerce Clause, and it read the record in that case to conclude that Congress had acquiesced in or approved what California was trying to do in the area of taxation, so there was no suggestion that what California was trying to do in that case prevented the Federal Government from speaking with one voice in the area of foreign commerce.
There's nothing, to begin with, comparable in this case to suggest that Congress has done anything to authorize California to engage in regulation of foreign insurance policies involving foreign companies and foreign beneficiaries.
Justice Ginsburg: But the United States must have been aware that the California legislation existed.
Mr. Geller: --I--
Justice Ginsburg: And the... part of the story is that this State legislation was on the books before the executive agreement with Germany and Austria that you've just applauded, so when California acted there wasn't any such accord.
Mr. Geller: --Well, several things, Justice Ginsburg, and then I want to get back to answer Justice O'Connor's question.
First, the Holocaust Act, the Federal Holocaust Act was passed before the HVIRA, so it could not in any way be read as acquiescing in or approving anything that California was doing in this area.
Secondly, and Mr. Kneedler will, I think, speak to this, the executive agreement did not expressly preempt any claims, because these were claims largely by foreign nationals against foreign companies, and the President did not believe it would be appropriate to extinguish all of those claims, but we're not dealing in this case with claims by individuals.
We're dealing with actions by a State which interfere with what the President himself has said are his goals in an area, a very sensitive area of foreign affairs.
And this case is not like... this case is much stronger than Zschernig, because in Zschernig, the Federal Government had done nothing in the area.
Nonetheless, this Court said that the States cannot enter into an area where it has the potential for embarrassment, or to interfere with the--
Justice Ginsburg: Zschernig involved criticism of a foreign government.
Mr. Geller: --So does this statute.
This statute criticizes--
Chief Justice Rehnquist: Is that really a sound basis for a decision like Zschernig, to say Oregon probate judges were inquiring about the policies of Eastern European countries?
I mean, I... I don't regard that as a very strongly reasoned opinion.
Mr. Geller: --But this case, Chief Justice, is much stronger than Zschernig because this is not a case, unlike Zschernig, where the President has done nothing in the area.
Here, the President has aggressively entered the area and tried to impose a solution which he has concluded is in the best interests of the foreign policy of the United States, so it's not a question of field preemption.
Zschernig could be looked at as a case of field preemption.
What the Court essentially said, I think, in Zschernig is that there is a field of foreign affairs where, even if the United States Government has done nothing, the States cannot enter.
This is a case that I think gets much more clearly analogous to conflict preemption.
Here, the President, with the acquiescence of Congress, has aggressively moved to try to solve a very serious international problem, and--
Justice Ginsburg: But Mr. Geller, said in that very agreement there is to be no preemption.
The President said that when California law was already on the books.
Mr. Geller: --I don't think it specifically says there's to be no preemption.
We're not dealing here, to begin with, Justice Ginsburg, with claims by individuals.
We're dealing here with State legislation, and in the executive agreement the President... the President promised to use his best efforts to prevent the States from interfering with the executive agreement.
He has concluded on many occasions that what California has tried to do here is a direct interference, a direct interference with the foreign policy position of the United States, which is to funnel all of these claims through an international commission.
Justice Kennedy: Well, if we can look just at the agreement, isn't this what is usually called an executory agreement, rather than a... than a fully executed agreement?
In other words, it says the United States, recognizing the importance of the objectives of this agreement, shall in a timely manner use its best efforts in a manner it considers appropriate to achieve those objectives.
That's... that's something yet to be done.
Mr. Geller: No, I think, Justice--
Justice Kennedy: --It sounds to me like executory, rather than fully--
Mr. Geller: --I think what the agree... Just... Mr. Kneedler is probably better equipped to address the meaning of the executive agreement, but it seems to me what... what the President has chosen to do there is to promise to use his best efforts to look to see whether any States or localities are taking actions which interfere with the promises that the President has made to foreign countries and foreign insurance companies to try to achieve legal peace in the United States, and in those instances where the States have taken action which interferes directly with that... with that promise, the President has promised to use his best efforts, such as to file briefs in this Court and others, arguing that these... these State statutes are preemptive, so it's... there's no... I think in the lingo of a statute there is no express preemption here, but there's clearly implied preemption under the Supremacy Clause.
Justice Stevens: --Mr. Geller, I may have misheard you, but didn't you describe the agreement a little more broadly than its terms?
The President's agreement, as I understood it, was to funnel all the claims through the... the... this... this new body, and I don't understand that producing the information that's sought in this case would preclude that from being done.
Mr. Geller: Well, the... the international commission not only set up a claims resolution process, it also has procedures for the disclosure of information which take into account European privacy laws, Justice Stevens.
It was a very--
Justice Stevens: But that's a different argument.
I mean, that's not based on the text of the executive agreement.
Mr. Geller: --Well, the executive agreement chose the... the President chose through the executive agreement and through his negotiations with foreign countries to use the ICHEIC system, rather than any parallel system, in part because of the concern about violating European privacy laws.
The California statute would be a blatant violation of European--
Justice Stevens: Well, but as I understand it, the California... one of the purposes of the California statute is to... to uncover claims that might not be known about.
It produces the information that would then allow the claimant to go to the... the--
Mr. Geller: --But the international commission has a separate... separate policy for divulging information that... and right now the, it's in the process of finalizing that.
Under the international commission, all of the insurance companies are producing their data bases in private--
Justice Ginsburg: --But all, Mr. Geller, would you clarify all, because I had the impression from the briefs that there were only five companies, and that they cover something like a little over 35 percent--
Mr. Geller: --No, that's... that's--
Justice Ginsburg: --of the universe of... of claims?
Mr. Geller: --false, Justice Ginsburg.
It's based on outdated information.
In light of the agreements that the United States has reached with Germany and Austria, all the insurance companies in those countries have agreed to follow the ICHEIC procedures so that with the inclusion of all the German insurance companies, all the Austrian insurance companies, all the Dutch insurance companies, and many of the Swiss insurance companies, I would say that the ICHEIC system now covers at least double the percentage that the--
Justice Ginsburg: It's still a wholly voluntary--
Justice Kennedy: --How... how specifically does the... does the California statute interfere with the operations of the commission?
Mr. Geller: --It interferes in a number of different ways, Justice Kennedy.
It interferes, to begin with, because it presents the possibility that these companies will have to pay twice, and it was a specific promise on the part of the United States that they would not have to pay twice.
Justice Kennedy: Well, that's assuming there's a suit brought later, but--
Mr. Geller: That's assuming, that's... this is all a part of the California system.
The only purpose--
Justice Kennedy: --And that doesn't meet Justice Stevens' point that this is just a disclosure--
Mr. Geller: --Well, that's... I want to get to that as the second reason, but I want to make sure the Court appreciates the first reason.
It was very important that these companies not be made to pay twice, and the President--
Justice Souter: --I... I don't understand.
Why would that be?
Why is there a risk?
Mr. Geller: --It would be because under the international commission these companies have already made a substantial payment, over $100 million, to settle their claims, but if the California process is allowed to continue, it's possible that people will be able to bring suit in California and recover separate--
Justice Ginsburg: This case is about a disclosure statute--
Mr. Geller: --It's--
Justice Ginsburg: --there's other legislation that is not before us.
Mr. Geller: --I under--
Justice Ginsburg: We are talking about a statute that doesn't authorize anybody to bring suit.
It simply requires disclosure.
Mr. Geller: --But the only purpose of the statute, and this is as clear as can be from the face of the statute, is to provide information so that Californians can bring suit in California, but the second way in which the California statute, Justice Kennedy, interferes with the ICHEIC process is that all of these companies agreed to the ICHEIC process on the assumption that European privacy laws would be respected.
That's... that is one of the principal reasons why the United States has negotiated this alternative system.
Justice Ginsburg: Mr. Geller, one... would you explain one thing that is troubling?
The privacy interest that is being asserted, one can understand an insured doesn't want the insurance company to divulge the insured's records, but we are dealing with a unique situation here in that many of these insureds, the insureds that were concerned, were killed in the Holocaust, and it seems to me to raise a privacy interest with respect to those people and their beneficiaries is... is kind of ironic.
Mr. Geller: --But Justice Ginsburg, this is very important.
Under... we're dealing with tens of millions of insurance policies here.
Only a small percentage of those policies has to do, have to... relate to Holocaust victims.
California would require, and this is a critical point for the Court, California would require disclosure of the intimate details of all 10 million of those policies, 99.9 percent of which have nothing at all to do with California, and nothing to do with any victims of the Holocaust.
Under the ICHEIC system, under the ICHEIC system, the only policies that will be publicly disclosed on a data base are policies held by... by possible victims of the Holocaust.
Justice Ginsburg: How does one know that?
Mr. Geller: It... it know... under I... under the ICHEIC system, all of the policies written during this era that are on electric data base are to be... are to be put into a system, and independently ICHEIC has done a census of all of the possible Holocaust victims in Germany during the pre-war period through various records and come up with several hundred thousand names which will be matched against the list of policyholders, and when there is a match, that list will be put out on a public data base.
Justice Ginsburg: There was a list--
Mr. Geller: --The German--
Justice Ginsburg: --There was a list that was due out in April.
Mr. Geller: --That will... I'm told that list will be out by the end of this month, and the German insurance authorities have concluded that publication of that list would not violate any privacy laws because it would be for the benefit of the people who are trying to recover on these unpaid Holocaust era insurance policies.
California, by contrast--
Justice Kennedy: --I take it you could make that argument even absent the claims commission.
Mr. Geller: --Absolutely.
What California has tried to do here would violate the foreign affairs power as well as the Commerce Clause, even absent the... the personal intervention of the President himself to seek an alternative solution to this vexing international problem, that's right.
For California, which has absolutely no relationship to any of these policies, to insist that they all be made public is, we think, a clear violation of the Commerce Clause.
Justice Kennedy: How... how does it relate to the... suppose we want to link the harm that this does under the privacy laws to the operation of the commission.
How do we do that?
Just, the... the burden and the cost to the companies that might better be expended on the claim--
Mr. Geller: It's simply that California has no relationship to any of these policies.
These policies were all policies written in Europe by European companies, and California's--
Justice Kennedy: --But that's a separate argument from the operation of the commission.
Mr. Geller: --It is a separate argument from the... I think the... the--
Justice O'Connor: Tell us briefly the principle of Federal law that you say governs this.
All of the sudden you're talking about the Foreign Commerce Clause.
Mr. Geller: --Yes.
We made three arguments--
Justice O'Connor: And I thought earlier in the argument you had said, oh, that really isn't our case, we don't need that, and that's what Zschernig--
Mr. Geller: --No, I... that's not true, I was... I was trying to distinguish the Barclay's case... the Barclay's case.
Justice O'Connor: --All right.
Well, at do you--
Mr. Geller: In addition--
Justice O'Connor: --What do you say is the principal flaw?
Mr. Geller: --There are... there are three arguments that we have made to attack this California statute.
One is, is that it is, under many decisions of this Court, including the recent decision in Crosby, in clear conflict with United States foreign policy.
The President has set out a particular policy to try to resolve the last remaining issue from World War II.
It involves channeling all of these foreign claims into an international commission in a way that respects European privacy laws.
California has set up a--
Justice O'Connor: And what case... what case establishes that principle, clear conflict?
Mr. Geller: --I would submit, United States versus Pink, United States versus Belmont are two cases in which the President issued executive agreements and the Court found that they preempted State law.
Justice Ginsburg: Yes, but here you... that's the big difference between those.
They preempted State law.
There's no pretense by... the executive says I'm going to use my best efforts.
Mr. Geller: --Those case... those executive agreements, I do not believe, had any express preemption provisions in them.
The Court simply concluded--
Justice Ginsburg: But when you take what the President undertook, which was just to use best efforts, that doesn't sound like--
Mr. Geller: --Under the Supremacy--
Justice Ginsburg: --this Court would have much to--
Mr. Geller: --Justice Ginsburg, I think it's the operation of the Supremacy Clause.
Here, the President has set out a policy for the United States, and has issued an executive agreement with foreign countries to try to implement that policy, and I think it is clear under the Supremacy Clause that the States cannot do anything that would frustrate or interfere with the operation--
Justice Ginsburg: --With full knowledge, when the President did that, that there were these laws in California.
Mr. Geller: --And at the time that the... that these laws were in the process of being passed, the President's personal representative, Stuart Eizenstat, wrote a letter to the Governor of California saying, please do not pass this law because it will interfere with what the United States is trying to do in the area of foreign policy, and I think it would be a shame if this law went into effect because of the disastrous impact it would have on the ICHEIC system, which the President of the United States... which two successive Presidents of the United States have concluded is in the best foreign policy interests of the United States, and the best interest of Holocaust victims in order to get money into their hands quickly.
But secondly, Justice O'Connor, in addition to the foreign affairs power, we think this is a blatant violation of the... of the Foreign Commerce Clause, which once again is not within the power of the States to interfere with.
Here we have foreign insurance policies that have absolutely no nexus to the State of California.
They are regulated by foreign--
Justice Stevens: Why do you say they have no nexus to California?
Is it not true that there are 4 or 5,000 residents of California who may or may not be beneficiaries of policies that they don't know about?
Mr. Geller: --Yes, but this... first of all, this Court has held that the fact that someone--
Justice Stevens: Am I right on that assumption?
Mr. Geller: --You're right on that assumption, but to begin with, Justice Stevens, we're talking about 10 million policies that you're trying to regulate, and at the maximum they say they may--
Justice Stevens: Well, you have to go through a big data base to find the 5,000.
Mr. Geller: --Well, I don't... I don't think that there, that under this Court's decisions that the fact that there may be a few thousand people in the State gives--
Justice Stevens: But if they do nothing more than identify policies people don't know about, how will that interfere with the basic program?
Couldn't they then require those claims be prosecuted in the tribunal that they're setting up?
Mr. Geller: --Because ICHEIC has set up an alternative disclosure system and the... which respects European privacy laws and secondly because the... the State of California simply has no power to exert its influence, even in the form of a disclosure obligation, on contracts that have no... absolutely no nexus to the State.
Justice Ginsburg: Mr. Geller, as I understand it, this ICHEIC system is wholly voluntary.
There's no law that enforces it.
And update me on something else that you did earlier.
You said many more insurance companies that were in it than 35, 40 percent.
As I understand it, 80 percent of the claims that were made to ICHEIC were turned down because the claimants were not able to identify sufficiently their heirs themselves--
Mr. Geller: I think most of the information in the record, Justice Ginsburg, and the information that the State relies on relates to several years ago, not to the current ICHEIC process before the German foundation and the Austrian foundation and a number of the Dutch companies had decided to participate fully in that process.
Justice Souter: --Is this in the record?
Mr. Geller: These are all events that... they're in the public record.
They're not in the record of this case, Justice Souter, but there are public documents from ICHEIC and from the President describing all of this.
If the Court has no further questions, I'd like to reserve the balance--
Argument of Edwin S. Kneedler
Chief Justice Rehnquist: Very well, Mr. Geller.
Mr. Kneedler, we'll hear from you.
Mr. Kneedler: Mr. Chief Justice, and may it please the Court:
The California statute at issue here is not a statute of general application that happens to have an incidental impact on foreign Nations, foreign countries, or foreign transactions.
It is a statute that is written exclusively and specifically with respect to a category of foreign insurance transactions occurring in foreign countries between foreign companies and foreign nationals more than 50 years ago, and it concerns a subject matter, the settlement of claims arising out of international conflict, that has... has always been understood by this Court to be the responsibility of the national Government, as reflected most recently in Dames & Moore.
Justice Ginsburg: Mr. Kneedler, I thought that the only requirement is put on a company licensed to do business in the United States.
The... California isn't reaching out to grab a foreign insurance company that isn't doing business in the United States.
It is asking questions of a company licensed to do business in the State of California.
Mr. Kneedler: But disclosure is a form of regulation.
This is true, this is obvious from our securities laws, it is... it is evident from this Court's decision in the BMW case of several years back, where the Court... which had to do with disclosure, and the Court said that one State may not try to enforce its policies with respect to the disclosure of information in other States, and we think that--
Justice Ginsburg: Did we do that?
Does the United States do that, or States under blue sky laws in the securities area?
Do we require disclosures of, say, affiliates that are set up in--
Mr. Kneedler: --Under blue sky laws, under the, I believe it's the Hall decision, the Court said that a State could require disclosures... with respect to in-State transactions it could require disclosures about issuance of securities out of State that are related to in-State transactions.
We have no in-State transaction here.
California has claimed two possible connections to the State to justify this statute.
The first is that the companies, the insurance companies, certain insurance companies do business in California.
Those are not the ones that issued these policies, but they do business in California.
Under this Court's decisions, I think most notably the Connecticut General case that is cited in the petitioner's brief, is a case where the Court said the fact that insurance companies do business in the State is not a sufficient basis for a State in that case to tax transactions, insurance policies that are entered into outside of that State, so it's clear that the fact that certain insurance companies do business in the State does not give California a right to regulate through disclosure transactions and policies that happened outside the State and, a fortiori, that's true with respect to foreign transactions.
The other interest that California has been... has asserted, which I think Justice Stevens referred to, is the fact that some number, a very small percentage of Holocaust survivors are in California, and with respect to that, this Court's decision in Shutts make, and other decisions make clear that moving to the forum State an adjudicatory jurisdiction is not a sufficient nexus, or... or legislative jurisdiction is not a sufficient nexus for a State.
What we have here, again, is one State of the Union trying to establish its own foreign policy, in the words of the Zschernig suit--
Justice Ginsburg: --Mr. Kneedler, suppose there were no Federal efforts in this area, which there weren't for sometime, and as I said, the executive agreements we're talking about post-dated this California disclosure law, suppose there was nothing, would you still say that because of the potential for interference there could be no State disclosure legislation of this character?
Mr. Kneedler: --Yes.
This, in our view, is... is a violation of the Constitution.
We think that the... that the longstanding efforts by the National Government to work out cooperative agreements with Germany and... and other countries in Europe arising out of the Holocaust underscores vividly why this is a matter of national concern, but we would be making the same argument irrespective of that.
The... the structure of our Constitution assigns to the National Government the resolution of foreign policy issues, and this is a... this is a very major and longstanding foreign policy issue about how foreign countries should resolve claims about their own nationals.
These policies were issued to European nationals.
It may be that there are beneficiaries or policyholders in California now, but this is... this is exclusively a matter for the National Government--
Justice Stevens: Mr. Kneedler, could I ask you to comment on one aspect?
As I understand it, one of the big insurance companies is an Italian company here that had... wrote policies throughout Europe.
Does this... does the executive agreement with Germany and Austria have any bearing on that... on that?
Mr. Kneedler: --Not, not directly, but... but we do think that the executive agreement manifests the executive branch's policy with respect to the resolution of Holocaust era claims, and there are, I think, two principal conflicts with respect to the United States policy.
One is the one, and I want to underscore this, the one that was mentioned with respect to the... to the lists.
ICHEIC is establishing essentially a registry, the very thing that California wants to do, but in a much narrower sense that has been negotiated specifically to avoid conflict between German privacy laws and... and United States law, and what... what... through this matching exercise and through use of various lists of... of Holocaust survivor organizations, Jewish organizations, and census lists in Germany will be putting together a pretty comprehensive list of Holocaust survivors and insurance policies issued in Germany to disclose in a way that German authorities believe that list will not violate German privacy laws.
The California statute, Germany takes the firm position would violate German... German privacy laws.
The other conflict is the whole thrust of the United States policy has been voluntary and cooperative, not mandatory and regulatory.
Justice Kennedy: That's... that's part of the problem I have with the executive agreement argument.
It seems executory.
It seems like something further is to be done, in that case will use its best efforts.
Mr. Kneedler: Well, but the best efforts was, it will use its best efforts with State and local governments, in other words in direct communications, and... and Assistant Secretary... Secretary Eizenstat and others communicated--
Justice Kennedy: Well, it could sign a supplemental agreement saying that we now agree that these laws should be superseded, just like we did in Pink.
Mr. Kneedler: --But this... this agreement says that... says two things, that it would be in the interest of the... this is on page 155a of the... of the petition appendix, that it would be in the interest of the two countries for the foundation to be the exclusive remedy for the forum of the resolution of claims, and on page 156a the agreement provides for the resolution of claims through ICHEIC and supplemental procedures to be developed through ICHEIC, which includes the development of this... of this list.
Justice Ginsburg: Mr. Kneedler, how does that relate to the litigation that was ongoing in the Eastern District of New York that I think involved a slave labor question?
Did the United States take a position that that litigation, which involved people who moved here, or their survivors moved here after, that that was improper litigation?
Mr. Kneedler: No.
Those... that did not involve State regulation, that involved private lawsuits, and there was a settlement which the United States encouraged.
Again, this was part of the overall approach of the United States Government.
Justice Ginsburg: But you were... one branch of this was that the... the United States people who moved here after, there was no connection with them.
Mr. Kneedler: Right, and if... if--
Justice Ginsburg: Well, those plaintiffs were all people who were certainly not in the United States when this happened.
Mr. Kneedler: --Right, and if... if there are sufficient adjudicatory connections to the United States, that would be fine.
I wanted to mention--
Justice Ginsburg: What were they in that case?
Mr. Kneedler: --Well, if the, if the... if the defendant was doing business in the United States, if a... if a suitable class action--
Justice Ginsburg: Was that so of the companies that were defendants in that case?
Mr. Kneedler: --It wasn't... it wasn't entirely, but there was a settlement there.
Some of these issues were not definitively resolved.
Justice Ginsburg: My only question was, did the United States take the position--
Mr. Kneedler: I don't--
Justice Ginsburg: --to stop that litigation--
Mr. Kneedler: --I... I don't believe so.
Justice Ginsburg: --because it was interfering with the executive--
Mr. Kneedler: I don't... I don't believe so specifically, but that was early in the... in the... in this settlement effort.
I want to make two important points about the United States, the... the Constitution's assignment of responsibility.
The Constitution assigns responsibility to the National Government for foreign relations and foreign commerce because any retaliation or any adverse impact will be felt by the Nation as a whole, not by the State that... that triggers it, and this is a point that the Court has made in Japan Lines and numerous cases over the years, and this case illustrates that, because what is going on here is complicating.
It is an impediment with our relations with European countries at a very sensitive time, when you have one State who... that is not participating in all of those efforts and doesn't have to balance the... the insult that might arise from a statute like this against all of the other issues that are on the United States' plate in dealing with foreign Governments at a particular time.
This is the very reason, that the States don't have enough information and the full responsibility and the National Government has to look out for the interests of the Nation as a whole, why one State may not thrust itself into foreign policy like this.
The due process and foreign commerce arguments are very complementary of that because they impose independent limitations on a State thrusting its regulatory power outside of not only its own borders but in this case outside the Nation's borders to, again, regulate through disclosure information about insurance policies in other countries.
The very fact that Germany and California insurance regulations generally maintain privacy of insurance information shows that questions of privacy and disclosure are matters of regulation.
Justice Souter: --Mr. Kneedler, would your argument be different if California, instead of providing this registry in public disclosure said, we want this information in order to decide whether we will allow these companies to do business in California?
Mr. Kneedler: May I... may I answer?
Yes, that would present a different question.
We don't think that California could require this blanket disclosure.
I think under international comity analysis, under this Court's decision in Aerospaciale, there may be some ability for the State to request certain relevant information--
Chief Justice Rehnquist: Thank you, Mr. Kneedler.
Mr. Kneedler: --to investigate the suitability.
Argument of Frank Kaplan
Chief Justice Rehnquist: Mr. Kaplan, we'll hear from you.
Mr. Kaplan: Mr. Chief Justice, and may it please the Court:
California's reporting statute addresses a despicable practice by insurance companies.
That practice is the deception of elderly Holocaust survivors in the refusal to provide them with basic policy information.
That stonewalling has occurred for decades, and it continues today, and it continues in California.
California responded to this insurance--
Justice Kennedy: Was the United States unaware of this problem when it negotiated an executive agreement?
Mr. Kaplan: --Absolutely not, Justice Kennedy.
The United States was well aware of California's efforts in this regard.
The 1998 statute that was referred to earlier that was passed by Congress occurred about 4 months after there was substantial testimony at a congressional hearing in which several State insurance commissioners--
Justice Kennedy: No, my... my question was, was United... the United States unaware of... of the wrongdoing that you're describing to us, or the... or the inappropriate corporate response, and the answer is, I assume that they were, and they did nothing about it in the executive agreement, other than to have this very specific claims procedure.
Mr. Kaplan: --That... that's correct, Your Honor.
Justice Kennedy: It's not as if California has uncovered something the United States didn't know about.
Mr. Kaplan: That's right.
There were... there were numerous hearings held by the National Association of Insurance Commissioners that are matters of public record in 1997 and 1998.
There was a congressional hearing in 1998, again in the year 2000, 2001, 2002, all of which described in extensive detail the stonewalling that had been committed by survivor... against survivors.
Justice Breyer: I... I don't think... the problem, at least for me, doesn't concern the desirability of the insurance company practice.
I'll concede, absolutely it's totally undesirable.
The problem, I think, for your side in my mind is letters, for example, from the Deputy Under Secretary of State Eizenstat to California, the insurance commissioner and the Governor, about this very statute, where he's speaking in an official capacity to say that the statute has the unfortunate effect of damaging the one effective means now at hand to process quickly and completely unpaid insurance claims from the Holocaust period, that this law has already potentially damaged and could derail the settlement, et cetera, so the record is full of the Deputy Under Secretary of State who negotiated the settlement, Eizenstat, Ambassadors, the President, lists of... in treaties, or executive agreements anyway, and you the... and you know what I'm referring to.
Why doesn't all of that, taken together, constitute what Justice Harlan in dissent in Zschernig called a Federal policy in the foreign affairs area, so that if we take the dissent in Zschernig it would seem, hypothetically, for... I'm trying to get your answer... that that long list of things shows a Federal policy such that Harlan and Stewart and the others, Harlan being at the extreme there, would have to say that California's statute is contrary to the Federal policy in this area, has an impact on foreign affairs of a negative nature through the conflict with the privacy statutes of Switzerland and Germany, and therefore is contrary to the foreign affairs power given to the executive branch by Article 2 of the Constitution.
All right, that's a long question, but those are the things that I'd like you very much to focus on from my point of view.
Mr. Kaplan: I will, Justice Breyer.
We're dealing here with a State commercial regulation, and... and, in fact, we're dealing with a... an area of State regulation that is a quasi-public business, insurance.
It's long been regulated by the States.
Congress delegated that authority to the States 60 years ago, and the States have been in that business ever since.
We believe that it's Congress, not the executive, that deals with matters of foreign commerce.
Justice O'Connor: Do you think that the... the President cannot effectively preempt on foreign policy grounds by his action an agreement?
Do you take that position?
Mr. Kaplan: I... I take the position, Your Honor, that in limited circumstances such as this Court dealt within the Pink and Belmont case, where you... you had the recognition of a foreign Government, or in the Dames & Moore situation where you had a foreign policy crisis and you--
Justice O'Connor: I think you could answer yes or no.
Mr. Kaplan: --I apologize, Your Honor.
Would you repeat the question?
Justice O'Connor: Well, do you take the position that there can never be a preemption on foreign policy grounds by action of the President alone?
Mr. Kaplan: No.
I think it's possible that the President could do that in some limited circumstances that I've indicated, but those circumstances do not exist here.
You have an expressly nonpreemptive executive agreement entered into after our law was passed.
The... the agreement was entered into after--
Justice Breyer: Well, of course... of course, if there were a preemptive... I'm trying to bring you back to my question.
Mr. Kaplan: --Sure.
Justice Breyer: I mean, if, in fact, we had a preemptive statute, or if we had a preemptive treaty, and I think, but I'm not sure, that an executive agreement is a kind of treaty, we would be dealing with the Supremacy Clause.
We wouldn't be dealing with the foreign affairs power of the President.
But the argument here is not the Supremacy Clause.
Nobody claims that there is preemption.
What they are claiming is, is that there is interference with, in Harlan's words, a Federal policy in the foreign affairs area, so if you're taking the position it has to be preemptive under the Supremacy Clause, then you're saying that all this material is totally irrelevant.
Now, that's a possible position, but I want to know what your view is.
Mr. Kaplan: Our view is that where the executive simply expresses an aspiration where... which is the situation here, where he's indicated he'll use his best efforts, it's no different than--
Justice Breyer: Oh, no, it's... what I've read to you is not an aspiration.
What I read to you were statements by the Deputy Secretary of State--
Mr. Kaplan: --Yes.
Justice Breyer: --that said the California statute is totally contrary to the efforts that they were trying to make.
I would... of course, it's not legally saying California is illegal, and that's why I'm... that's what I want you to explore.
Mr. Kaplan: The response, Justice Breyer, is this.
Under the Barclay's decision, Congress is the primary authority when... when dealing with--
Justice Breyer: I thought Barclay's had to do with the Commerce Clause.
Mr. Kaplan: --It dealt with both the Commerce Clause and the foreign affairs power.
The Zschernig case was taken for review by the Court.
The Court did not dispose of that, and we believe that the foreign affairs issue is subsumed within the Barclay's decision when you're dealing with matters of State commercial regulation.
Justice Ginsburg: The... Barclay's dealt with the Foreign Commerce Clause, and it made the point that the one voice in that area was Congress, not the President.
It wasn't dealing... that case did not deal with executive agreements, as I recall it, and I think I have a pretty good memory of that case.
Mr. Kaplan: Yes.
Justice Breyer: And that being so, you see, the... this is not the same for that reason, and also what we're talking about here is, the Governments of Switzerland and the Governments of Germany, not private people, saying that if California enforces this statute, 98 percent of which has nothing to do with Holocaust victims, that is, the insurance policies don't, that is, what we're worried about under our privacy statutes is Gwendolyn finds out that Uncle Harry in England left all the money to Cecily instead of Gwendolyn and, of course, Cecily doesn't want that to occur.
That's her private affair.
That's why Germany and Switzerland have laws that say these matters are quiet, silent, private, and those Governments are telling us that your statute violates their privacy law because of its overbreadth.
Mr. Kaplan: Foreign Governments were extraordinarily upset about the... the tax that was the subject of the Barclay's case.
In fact, the British Government passed retaliatory legislation, and this... this Court found that that was not sufficient when there was no specific indication by Congress of an intent to bar the State law.
Here, you've had testimony by Deputy Secretary Eizenstat before Congress--
Justice Kennedy: Yes, but... but that's... the Congress has principal concern with revenue and fiscal policy.
It doesn't have principal concern with foreign policy.
It's very different.
Justice Ginsburg: And that was the reason that Barclay said you... yes, you're right that the executive branch was in there saying look, all these foreign countries are upset, and we think that they have a good case.
That was the executive position, and this Court said, but you're dealing in an area where Congress has the lead, holds the lead rein and not the President.
That's the only point that... we... when we were talking about the Foreign Commerce Clause authority, that's a different question than the executive authority.
Mr. Kaplan: --I... I believe, Justice Ginsburg, the issue here is whether the President, by engaging in some negotiation, or expressing an aspiration as to what the President thinks the foreign policy ought to be, can trump a State regulation, and I think the consequence of that being so would be dramatic for matters of State regulation, because State regulation often has some sort of foreign implication to it, since we're dealing with a global economy and there are often foreign affiliates that are called upon to report on information, and if... if that law was overturned because a foreign Government or the executive branch complained about that conduct, State regulatory law would effectively be thwarted.
Justice Scalia: Well, we can... we can distinguish those cases.
As... as pointed out by... by your adversary, the difference in this law is that it is only directed at foreign Nations.
Mr. Kaplan: No... no, Your Honor--
Unknown Speaker: The... the only... the only disclosure required is... is by affiliates abroad, isn't it?
Mr. Kaplan: --Justice Scalia, that's not correct.
The disclosures are required by California licensees, including companies that wrote insurance who were California licensees.
Justice Scalia: What disclosures are required by those licensees?
Mr. Kaplan: Disclosure of the name of the policyholder, where the policyholder lived, and the name of the beneficiary--
Justice Scalia: Yes.
Mr. Kaplan: --and the status of the policy as to whether it's paid--
Justice Scalia: Of policies written by them?
Mr. Kaplan: --Yes, or their affiliates.
Or their affiliates.
You have a situation, for example, where Generali has been licensed to do business in California since 1935--
Justice Scalia: Policies written anywhere in the world?
Mr. Kaplan: --Written in Europe.
Justice Scalia: Ah.
In other words, it's only directed at the regulation of foreign matters.
Mr. Kaplan: It's... it's direct--
Justice Scalia: We can... we can easily distinguish those... those California's laws that... that are general laws which have some indirect effect upon foreign affairs.
This... this thing is directed at foreign operations.
Mr. Kaplan: --It's directed at a concern that California has by reason of the migration of... of a large number of Holocaust survivors to the State and, in fact, the numbers that we've indicated in our submissions, Your Honor, are that there are at least 20,000 Jewish Holocaust survivors, and we don't know how many non-Jewish Holocaust survivors there are in the State.
Justice Kennedy: And to that... and for that reason California candidly made specifically reference to Nazi-controlled Germany, to present-day Germany, and to Europe, and to the Holocaust, none of which are of California's concern when it conflicts with the President's power to deal with those matters.
Mr. Kaplan: Justice Kennedy, I... I guess I disagree.
I think California has a substantial concern.
It has a concern about people in the State who don't have basic policy information that they're seeking.
Justice Breyer: Why don't they, because you see, as... as it's been argued to us anyway, there are two ways of achieving this result.
Way number 1 would have privately people whom you select, or trust, to go through the 10 million policies that were sold, pick out all those that might have to do with Holocaust victims, and make them public.
I take it that's the route that Secretary Eizenstat negotiated.
The other way is California's way, which is, you make the whole 10 million public, so Gwendolyn and everybody else finds out everybody else's information, which happens to be a way that would violate the privacy laws of Switzerland and Germany.
Now, what interest does California have in doing it the second way, rather than the first way?
Mr. Kaplan: California has an interest in obtaining information that companies doing business in the State have so far exhibited they're unwilling to provide.
By requiring the information that the law asks for, we will be sure that there's no further stonewalling occurring in the State, and that companies that want to do business in the State will not engage in that conduct in the future.
It will also assure that people--
Justice O'Connor: Well, it looks like the way this scheme is written is, the... the companies doing business in California have to provide the information even if they're unable to do so, even if when they go to an affiliated, or company related somewhere down the line, let's say in Germany or Austria, and ask for the information, and German or Austrian law prohibits that from being disclosed, then the California company will have its license yanked.
Now, what kind of law is that?
Mr. Kaplan: --It's the same kind of law, Your Honor, that the Europeans practice, too.
We've cited something in the record.
It's the European directive that appears at 2 E.R. 2747 to 2748.
European regulators, just like State regulators, deal with situations all the time where there may be a conflict with a foreign law or the law of another State, and if States are... are able to effectively regulate the business that... that is going on in the State and the companies doing business here, they have to have the right to be able to apply their law.
Otherwise, there could be a law established in... in the Cayman Islands that established a privacy right for companies doing business in the State, and a... a company could assert that the law of a foreign country precluded that company from... from complying with a State regulatory law, and we don't think that's how the law works.
Justice Souter: Well, are... are you saying that there is no way that the United States could act that would, in fact, have that effect?
Mr. Kaplan: I'm sorry--
Justice Souter: I mean, if... if Congress passed a statute in effect condemning what California had done, not repealing McCarran-Ferguson but simply condemning it, or... or authorizing the President specifically to make what the... the agreements that the President has made on an executive basis now, are you saying that neither of those acts in effect would preclude California from doing what it is doing under this statute?
Mr. Kaplan: --No, Justice Souter.
I think you'd have a serious preemption problem there under the--
Unknown Speaker: Okay, so it... it boils down, them, to an argument about the executive power alone, is that correct?
Mr. Kaplan: --Yes, it does.
It boils down to a separation of--
Justice Souter: Well, is... is your argument... and I... I will be quiet after this question and let you say whatever you wanted, but what I want you to focus on is--
Mr. Kaplan: --Yes.
Justice Souter: --do you take the position that whenever the executive, let's say, agreement by executive... action by executive agreement is, in the opinion of a State regulator, inadequate to address the regulatory problem as the regulator sees it, that the regulator is free, in effect, to disregard the policy in the executive agreement?
Do you take that position?
Mr. Kaplan: I do unless the executive agreement is preemptive and unless there's something else about the executive agreement that would give it preemptive quality.
Clearly, the executive agreement--
Justice Souter: Well, are we talking about form of words?
If the President and executive agreements had in effect said, and no State can do anything which is inconsistent with this policy, would your position be different?
Mr. Kaplan: --It might be, because I think you'd be dealing with a situation there where arguably it would be a preemptive executive agreement which might carry the same status as a... a statute by Congress.
Justice Scalia: Why does he have to--
Chief Justice Rehnquist: --What if Congress had... had ratified what the President did so that it's no longer just an act of the President but an act of the President approved by Congress?
Would your position be any different?
Mr. Kaplan: Your Honor, then you might have a situation like Dames & Moore, where there was a pattern of congressional acquiescence in the kind of executive agreements that occurred there.
Chief Justice Rehnquist: Well, but this isn't... this isn't just acquiescence in a... in an executive agreement.
This is Congress saying, we approve and ratify it.
Mr. Kaplan: Then... then you might have the kind of specific disapproval of State action that this Court talked about in the Barclay's case.
Justice Souter: Well, why would it be any more specific than this is?
If the executive agreement is not expressly preemptive, and Congress passes a statute saying, we agree with it; we think the executive agreement is right on the money, it wouldn't, in fact, be any more restrictive or less restrictive than it is now.
Mr. Kaplan: --I... I think the difference, Your Honor, is then you have Congress acting, you have Congress speaking, which is what this Court in Barclay's thought was the appropriate actor to speak in matters of foreign commerce.
Justice Scalia: Congress makes laws.
The President doesn't make laws.
I'm not sure that the President can make an executive agreement preemptive which is not preemptive in its nature.
I mean, all... all he can say is, is there any... any State action which is inconsistent with our foreign policy expressed in this agreement is invalid, but that's not... not something that occurs by reason of his pronouncement.
It occurs, if it occurs at all, by reason of the Constitution, automatically, so it really doesn't matter whether he says that or not.
His saying it cannot make it happen, and his not saying it, I think, cannot not make it happen.
Mr. Kaplan: I agree.
Justice Scalia: You shouldn't agree.
Unknown Speaker: [Laughter]
Mr. Kaplan: Then I won't.
Justice Stevens: May I ask you whether you think that--
There are one of two people who can decide that, the Secretary of State or, say, the Governor or Insurance Commissioner of California and the problem for you, I think, is that the Constitution seems to give the authority to decide that to the Secretary of State and not the Insurance Commissioner of California because it's a foreign affairs matter.
Mr. Kaplan: I... I think actually the... the Constitution gives that authority to Congress, and if the executive branch--
Justice Breyer: You mean, Congress is supposed to run foreign affairs on every... all of these matters?
Mr. Kaplan: --Congress is supposed to run foreign... matters of foreign commerce, including objections by foreign Governments about the way States are behaving.
If they... if they think they're behaving badly, then the executive can go to Congress, lodge a complaint, and if Congress is so inclined, Congress can do something about it.
Clearly, here, Congress has done nothing about it.
In fact, Congress has... has encouraged the State statute.
There was testimony before Congress.
Congress didn't say stop doing that.
Congress said, we bless what you've done, we think you're doing a good job, keep doing it.
Chief Justice Rehnquist: In what way did Congress say this?
Mr. Kaplan: Congress said that in--
Chief Justice Rehnquist: I mean, was it a committee report, or an act of Congress?
Mr. Kaplan: --There were statements made by... by Members of Congress in response to testimony that was given, including the 2002 hearing--
Chief Justice Rehnquist: Well, you're... you're saying that is the voice of Congress?
Mr. Kaplan: --No, I'm not.
I'm saying the McCarran-Ferguson Act is the voice of Congress, the--
Chief Justice Rehnquist: Well, but you just said a moment ago that Congress had... had approved this.
Mr. Kaplan: --Yes.
Congress has approved it either implicitly or directly through the McCarran-Ferguson Act, which gives the States authority to act in matters of insurance.
In the Holocaust Commission Act Congress, in effect, endorsed State action to deal with Holocaust insurance matters.
Justice Ginsburg: Is it not true that the... what the Congress endorsed there was presidential leadership, not State action?
Mr. Kaplan: But in... but in that statute Congress recognized that States were acting in this area.
The statute said that the commission there should coordinate its activities with the States, and it asked the National Association of Insurance Commissioners to pass... to prepare a report, rather, on the activities of foreign and domestic insurance companies doing business in this country, and the Ninth Circuit found, and we believe it was reasonable for it to find that Congress anticipated, understood, and... and knew that... that the States would be acting pursuant to State law and might have to seek information from entities located outside the borders of this country.
Justice Scalia: Mr. Kaplan, there... there was a reason, I think, why the Federal Constitution gave the power to conduct foreign affairs not to the Congress but to the executive, and the reason was that Congress is not a very good instrument for that purpose, that there are all sorts of matters that come up where... this being one of them, where it is very difficult for a Member of Congress to cast a vote against Holocaust victims.
That's what we're talking about.
Why... why should the situation exist that, although the President has the responsibility without Congress for conducting foreign affairs, his conduct of foreign affairs can be frustrated by the States unless Congress comes to his assistance?
Why... why should that follow?
It would seem to me it should follow that he can protect this foreign affairs field on his own, and does not have to call for the assistance of Congress.
Mr. Kaplan: We believe that that would lead to... to a situation where, any time the executive decides that there's a matter of... of foreign policy concern to him, legitimate State regulation would have to take a back seat to that, so you have, in essence, presidential lawmaking without any--
Justice Scalia: Well--
Mr. Kaplan: --any sort of accountability that you normally have--
Justice Scalia: --It just shifts... it just shifts the inertia, really.
Congress is the 900-pound gorilla.
If it doesn't like what the President is doing in the field of foreign affairs, it can stop him as quickly as it likes.
All it has to do is pass a resolution cutting off any funds for that purpose, cutting off any funds for this... for further negotiations about this institution.
Congress always has the trump card.
But why should we... should we require Congress to protect the President from the States?
Why shouldn't he have an automatic protection from it?
Mr. Kaplan: --Because except in limited areas such as Zschernig, in Belmont, in Pink, and in Dames & Moore, where you have a foreign policy crisis or a recognition, ordinarily I don't believe that this Court wants the executive to go off and announce foreign policy issues that will have effect on State regulation.
It affects issues of federalism and separation of powers.
Here, in fact, it was the State regulators that formed ICHEIC.
This was a creature of the State regulators, and after 4 years of not having done anything, the State regulators decided that enough's enough, these people are not getting the information.
There were 77,000 claims submitted.
Only 700 offers were made, less than 1 percent.
These people are in a line to nowhere, because without this information they can't make a claim to ICHEIC.
They can't even call the insurance company, because they don't even know which insurance company--
Justice Ginsburg: Mr. Kaplan, we've been told that that... that's past history--
Mr. Kaplan: --It's not.
Unknown Speaker: --as a result of these recent efforts, that there's much more disclosure coming out of ICHEIC.
Mr. Kaplan: There's not, Your Honor.
There... there's been... there's expected to be some disclosure from German companies.
We don't know what that's going to be.
The... insurance was written all over Europe.
The German market was only a small part of this European market.
Generali wrote insurance all over Eastern Europe, and all the countries in Eastern Europe.
They have a list now sitting in Trieste, Italy, with 340,000 names on it.
They could turn that list over tomorrow.
There's no privacy issue involving Generali.
There's no Italian law that precludes it.
They've simply refused to turn it over.
These survivors do not have access to this information.
They do not know whether their policies were written by Generali or some other country... company because they simply don't have the information that enables them to even think about making their claim.
This is not a claims-paying statute.
We're not asking these companies to pay twice.
Survivors would be grateful if they paid once.
There's nothing whatsoever in this statute that... that deals with the legitimacy of these claims, whether they're rightful or not.
It simply gives these people information that allows them to make a decision as to whether they want to pursue a claim.
They don't have that ability now.
If there are no further questions I would--
Justice Stevens: Yes, I have one question, if I might.
Mr. Kaplan: --Yes, sir.
Justice Stevens: I would draw a distinction in my question between Eizenstat's letter, which in effect says, please don't enforce these subpoenas because that will louse up our negotiations and so forth.
Put that to one side, and... and I ask you if you would agree or disagree with the suggestion that if you do enforce the subpoenas you will violate a... a provision of one of the two executive agreements?
Mr. Kaplan: I don't think there's any violation of the executive agreements.
Those agreements simply provide, with respect to State regulatory action, that the United States will use its best efforts.
To me, that's a recognition and an understanding that the Federal Government knew that insurance is a State matter, a State regulation.
That's all that the Federal Government was doing.
It said, we'll try our best to get the States to back off, we're making no promises to you because we don't think we have the authority.
We believe in matters of insurance it's the States that have that authority.
Justice Scalia: Or it could be an acknowledgement by the President that this is a matter that ultimately depends upon whether his foreign affairs power is... is... trumps the State action in this field, and... and it could be a commitment by him to come to this Court to ask us to make that declaration, which is not a declaration that he can authoritatively make.
Mr. Kaplan: On... on page 17 of the Solicitor General's brief in this matter the Solicitor General takes the position that even as to the executive agreements it only would have some preemptive effect, if it has any at all, as to the companies and the countries where the agreements were made, so I believe the Solicitor General acknowledges it wouldn't have any preemptive effect whatsoever for the Italian companies, the Swiss companies, or companies anywhere else in Europe.
Justice Breyer: What about the letter?
I... I... that's why I asked the question at the beginning.
Eizenstat's letter... it's on 99a of the appendix.
I... I didn't know whether that's limited to the subpoena part or whether it had to do with the disclosure, or whether it's referring to the statute as a whole.
When I read it, honestly, I thought it was the, probably the statute as a whole, but I don't know.
Do you have any light to shed on that?
Mr. Kaplan: I... I do not, Your Honor.
I don't recall the--
Justice Breyer: You think it could be the statute as a whole he's talking about?
Mr. Kaplan: --It could well have been.
Justice Breyer: Yes, all right.
Chief Justice Rehnquist: Thank you, Mr. Kaplan.
Mr. Kaplan: Thank you very much.
Chief Justice Rehnquist: Mr. Geller, the marshall says you have 5 seconds left, and under the principle of--
--de minimis non curat lex the case is submitted.
Argument of Speaker
Mr. Kneedler: The opinion of the Court in No. 02-722, American Insurance Association versus Garamendi will be announced by Justice Souter.
Argument of Justice Souter
Mr. Souter: This case comes to us on writ of certiorari of the Court of Appeals for the Ninth Circuit.
In 1998, the State of California passed the Holocaust Victim Insurance Relief Act which requires any insurance company operating in California to disclose certain information about policies at or any affiliated companies sold in Europe between 1920 and 1945 or else lose its license to do business in the State of California.
The law's objective is to help Holocaust victims find out about policies issued by European insurers, who has not paid the value or benefits of the policies to their true owners or beneficiaries for reason related to the criminality of the German Nazi regime and the disruption of the World War II.
In 1999, the petitioners, a group of European and American Insurance Companies filed suit challenging the law's constitutionality on the ground that it is preempted by the National Government's diplomatic position on the specific matter of unpaid claims under the European insurance policies in issue.
The Ninth Circuit held the law valid and we now reverse.
The problem with insurance debt by European corporations during World War II has been an object of American diplomacy for over half a century.
The trigging in effect during the cold war put a moratorium on Holocaust claims by foreign nationals, but when that moratorium was lifted in 1990, class action suits against European companies poured into American Courts.
Those suits brought protest by the defendant companies leading the President to enter into any negotiations with allied European nations to establish a mechanism for resolving insurance claims related to the Holocaust.
The Executive Branch position in these negotiations was to encourage European Governments and companies to volunteer both information about unpaid policies and funds to settle claims brought under them.
The principle exemplars of the American position in our Executive Agreement signed by President Clinton with Germany and Austria which declares that all insurance claim should be processed through a voluntarily settlement organization known as The International Commission on Holocaust Era Insurance Claims.
This American position has consistently been maintained with respect to all European insurers.
The petitioner’s argument for preemption is that the California law interferes with the President's foreign policy as expressed in the formal executive agreement and statements originating in the State Department.
The claim rests on two premises, each of which is supported by our cases: the first is that the President has some independent constitutional authority to determine what the nation’s foreign policy should be, the principle established in our President’s recognizing that the President plays the lead role in representing the United States on international issues; the second premise is that state law must yield to the President’s foreign policy if the two are in serious conflict.
The principal authority for that preposition is our decision in Zschernig v. Miller in 1968.
In that case we found and Oregon probate statute touching on foreign affairs to be preempted on the theory that the field of the foreign affairs is an exclusively federal domain even in the absence of any express federal policy in the area of the state law and even though the State Department itself brought there that there was no objectionable conflict of state law in national position.
Justice Harlan disagreed with the majority's field preemption theory, but all members of the Court agreed that preemption is required if state law conflicts with an expressed foreign policy of the National Government.
Here, the evidence leaves no doubt about the conflict.
In contrast to the President’s endorsement of the International Commission's voluntary approach to disclosure of insurance information, California’s economic compulsion to make disclosure a far more information than the International Commission requires undermines the President’s discretion in dealing with European allies and the choice he has made in exercising it.
The California law also threatens to frustrate the President’s objectives in making it more difficult to persuade foreign companies to participate in voluntary organizations like the International Commission.
Indeed, shortly after the California law was passed, the officials of the Executive Branch wrote to California officials saying that the state law threatened the success of the President’s diplomatic initiatives.
The evidence presented is enough to make clear that the California law interferes with the President’s articulated foreign policy with the consequence that it is preempted.
Justice Ginsburg will announce the dissenting opinion.
Argument of Justice Ginsburg
Mr. Ginsburg: For over five decades, the Holocaust survivors and their descendants have tried with little success to collect the insurance proceeds unpaid since the Holocaust Era.
Inadequate access to information has impeded those efforts.
Documents ordinarily used to backup insurance claims, policies issued to insured person and death certificate were often unavailable to families of policy holders who perished in concentration camps.
European insurers were notably resistant, they rarely volunteered information needed to identify rightful holders of unpaid Holocaust Era claims.
The California statute at issue, the Holocaust Victims Insurance Relief Act which I will call HVIRA, was enacted in 1999 to address that half century of silence.
A direct insurance company is operating in California to disclose basic facts about policies they or their affiliates wrote in Europe between 1920 and 1945.
More than five thousand Holocaust survivors reside in California, information disclosed pursuant to the HVIRA could reveal to survivors or their heirs, the existence of a viable insurance claim. The HVIRA at bares emphasis does not authorize litigation of Holocaust Era claims in any court.
It requires only disclosure of information such as to whom a policy has issued covering what risks and when.
The Court today strikes down the HVIRA on the ground that California's disclosure requirements interfere with the Federal Government's current effort to resolve Holocaust Era insurance issues by diplomatic means.
Those federal efforts are embodied in a series of executive agreements, the United States concluded in the years 2000 and 2001, first with Germany then with Austria and France.
The executive agreements endorse in lieu of litigation to resolve Holocaust Era insurance claims, the administrative processes of the commission set up in 1998, the International Commission on Holocaust Era insurance claims its acronym ICHEC.
As the Court recognizes the executive agreements with Germany, Austria and France contain no reference to state disclosure law specifically or even to the information disclosure generally.
The Court nevertheless draws an inference from the executive agreements endorsement of the ICHEC; implicitly, the Court conclude the foreign policy embodied in the agreements preempts any information disclosure mechanism not controlled by the ICHEC itself.
This despite the admittedly haulting and insecure performance of the ICHEC since its inception in 1998.
Justices Stevens, Scalia, Thomas and I would not invalidate California’s enactment on the basis of the inferential reasoning the Court today employs.
Never before has this Court relied on an executive agreement to preempt the state law when the agreement itself did not so specify, the judiciary has no right to serve as an expositor of the Nation’s foreign policy by filling in a blank so large.
Four of us would not override an otherwise permissible state law by reading into an executive accord of preemptive prescription nowhere stated in the agreement itself.
I agree with the Court that the President may speak with one clear voice with the nation in matters of foreign affairs, but sustaining HVIRA would not undercut that Presidential authority, rather, it would simply recognize an ambiguous prefatory or gap laden speech will not do to displace laws, federal or state, properly enacted and precisely in point.
Foreign affairs preemption by Presidential Decree, I withhold is properly reserved the matters actually addressed in the executive action, because no clear statement, indeed no statement at all, on information disclosure is contained in the executive accords before us.
I would leave California's enactment in place and affirm the judgment of the Court of Appeals.