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December 23, 1987

United Services Automobile Association, et al., Plaintiffs
Constance Foster, Defendant

R. Dixon Herman, United States District Judge.

The opinion of the court was delivered by: HERMAN

R. DIXON HERMAN, United States District Judge

 In this action against the Insurance Commissioner of the Commonwealth of Pennsylvania (hereinafter "Commissioner"), the plaintiffs, United Services Automobile Association, U.S.A.A. Casualty Insurance Company, U.S.A.A. Life Insurance Company, and U.S.A.A. Annuity and Life Insurance Company (hereinafter "USAA") challenge the constitutionality of Section 641 of Pennsylvania's Insurance Department Act of 1921, 40 Pa. C.S.A. § 281. *fn1" Presently before us are three motions: the motion of the Commissioner for summary judgment on abstention grounds; the motion of USAA for summary judgment on pre-emption grounds; and the motion of USAA for summary judgment on Commerce Clause grounds.


 USAA, a reciprocal interinsurance exchange organized and existing under the laws of Texas with its principal place of business in San Antonio, is licensed to sell insurance in Pennsylvania. In April, 1984, USAA Financial Services, a wholly-owned subsidiary of USAA, filed an application with the Federal Home Loan Bank Board for a Federal Savings Bank Charter for the USAA Federal Savings Bank. The bank received its charter and began operations in San Antonio in December, 1983. The bank has no locations in Pennsylvania.

 In July and August, 1984, the Pennsylvania Insurance Department notified USAA that its indirect ownership of the bank in Texas constituted a violation of Section 641 of the Insurance Department Act and advised USAA that it must divest itself of the bank or risk revocation of its licenses to transact insurance business in Pennsylvania. In November, 1984, USAA brought the present action under 42 U.S.C. § 1983, seeking declaratory and injunctive relief against the Commissioner, and, in December, 1984 the Commissioner initiated state agency proceedings to revoke the plaintiffs' insurance licenses.

 After consideration of the motion of the Commissioner to dismiss the federal action on abstention grounds, we ordered the action dismissed on September 30, 1985. USAA appealed from our order.

 In June, 1986, the Court of Appeals for the Third Circuit reversed the judgment and remanded the case for further proceedings consistent with its opinion. See United Services Automobile Association v. Muir, 792 F.2d 356 (3d Cir. 1986). Thereafter, we issued a preliminary injunction which prohibits the Commissioner from revoking the plaintiffs' insurance licenses pending further order.

 In October, 1986, the Commissioner filed a Petition for a Writ of Certiorari in the Supreme Court. The Supreme Court denied the petition.

 On August 21, 1987, we granted the motion of the Pennsylvania Association of Independent Insurance Agents, John M. Ulrich, Jr., Professional Insurance Agents Association of Pennsylvania, Maryland and Delaware, Inc., Charles P. Leach, Jr., Pennsylvania Association of Life Underwriters and Harold E. Alexander, to intervene in the action. Oral argument on the motions for summary judgment was held September 16, 1987.


 In our September, 1986, ruling in this case, we dismissed USAA's complaint on abstention grounds. We relied on the three different types of abstention set forth in Railroad Commission of Texas v. Pullman, 312 U.S. 496, 85 L. Ed. 971, 61 S. Ct. 643 (1941); Burford v. Sun Oil Co., 319 U.S. 315, 87 L. Ed. 1424, 63 S. Ct. 1098 (1943); and Younger v. Harris, 401 U.S. 37, 27 L. Ed. 2d 669, 91 S. Ct. 746 (1971). The Court of Appeals for the Third Circuit reversed our ruling and held that none of the three types of abstention applied. USAA v. Muir, 792 F.2d 356. On remand, the Insurance Commissioner has again moved for abstention based solely on the Younger abstention. For the following reasons, we shall deny the motion.

 The Commissioner has renewed the motion for summary judgment on abstention grounds basing his argument on the holding in the recent Supreme Court case of Ohio Civil Rights Commission v. Dayton Christian Schools, 477 U.S. 619, 106 S. Ct. 2718, 91 L. Ed. 2d 512 (1986). In Dayton, the Supreme Court held that Younger abstention applies "to state administrative proceedings in which important state interests are vindicated, so long as in the course of those proceedings the federal plaintiff would have a full and fair opportunity to litigate his constitutional claim." Id. at , 106 S. Ct. at 2723, 91 L. Ed. 2d at 522. The Court further ruled that even if the state administrative agency could not itself consider the constitutionality of a state statute it is called upon to enforce, "it would seem an unusual doctrine . . . to say that [the agency] could not construe its own statutory mandate in the light of federal constitutional principles . . . . In any event, it is sufficient . . . that constitutional claims may be raised in state court judicial review of the administrative proceeding." Id. at , 106 S. Ct. at 2724, 91 L. Ed. 2d at 523.

 Although we agree with the Commissioner that the holding of the Supreme Court in Dayton appears to overrule the Third Circuit's holding in USAA v. Muir on the issue of Younger abstention, the Third Circuit's latest decision involving Younger abstention, Sullivan v. City of Pittsburgh, 811 F.2d 171 (3d Cir. 1987), requires us to reject the Commissioner's motion for summary judgment. In addition to the requirement under the Younger abstention doctrine that there be an ongoing state proceeding in which constitutional claims can be raised, the Third Circuit in Sullivan added the requirement that, in order to invoke Younger abstention, irreparable injury may not be threatened. *fn2"

 In USAA v. Muir, the Third Circuit decided that USAA would suffer irreparable harm if we were to abstain. *fn3" Therefore, on the issue of abstention, we are bound by the Third Circuit's prior opinion in this case. If the Third Circuit in Sullivan had not added the requirement of no threat of irreparable harm to the Younger abstention doctrine, we would have leaned toward granting the Commissioner's renewed motion for summary judgment on abstention grounds. However, because of the Sullivan opinion, we are clearly bound by the Third Circuit's decision in USAA v. Muir under the law-of-the-case doctrine. *fn4"

 USAA has moved for summary judgment on pre-emption grounds, arguing that Section 641(b) as applied to USAA is invalid under the Supremacy Clause of the United States Constitution. Specifically, USAA claims that Section 641(b) is pre-empted by the Home Owners' Loan Act of 1933 ("HOLA"), 12 U.S.C. § 1461 et seq., the National Housing Act, 12 U.S.C. §§ 1730, 1730a, and the regulations promulgated pursuant to these acts. USAA offers two reasons to support its claim of pre-emption: (1) Congress has occupied the entire field regarding the organization, ownership, incorporation and operation of federal savings banks; and (2) Section 641 is in actual conflict with federal law, standing as an obstacle to the full accomplishment of the federal government's purposes in that the federal government, through the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation, approved USAA's ownership of the savings bank in Texas.

 Pre-emption of a state law by a federal law or regulation has its roots in the Supremacy Clause which provides that the "Constitution, and the Laws of the United States which shall be made in Pursuance thereof; . . . shall be the supreme Law of the Land; . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. art. VI, cl. 2. It is well-settled that pre-emption may occur in any of the following three ways:

First, in enacting the federal law Congress may explicitly define the extent to which it intends to pre-empt state law. Second, even in the absence of express pre-emptive language, Congress may indicate an intent to occupy an entire field of regulation, in which case the States must leave all regulatory activity in that area to the Federal Government. Finally, if Congress has not displaced state regulation entirely, it may nonetheless pre-empt state law to the extent that the state law actually conflicts with federal law. Such a conflict arises when compliance with both state and federal ...

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