AIA v. Garamendi, another step backwards

By Robert S. Sargent Jr.
web posted July 7, 2003

Lately, all the discussions about the Supreme Court have focused on the two Michigan decisions dealing with racial preferences, and the Texas decision dealing with anti-sodomy laws. In a much less publicized case, American Insurance Association (AIA) v. Garamendi, Insurance Commissioner, State of California (decided June 23, 2003), federalism and state's rights were handed a defeat. As I pointed out recently on these pages (ESR 6/9/03), Justice Rehnquist abandoned his record of upholding state's rights in Nevada v. Hibbs. In AIA v. Garamendi, Rehnquist has taken another step backwards.

Holocaust victims and their descendents have long been frustrated in their quest to collect unpaid insurance claims against the German government. Proceeds from life insurance policies held by German Jews were either paid to the Third Reich, or never paid at all. Germany has agreed to set up a funded foundation and work with the voluntary organization known as the International Commission on Holocaust Era Insurance Claims (ICHEIC). This organization negotiates with European Insurance companies to provide information about and settlements for Holocaust victims and descendents. The United States has agreed that the German foundation, which works with the ICHEIC, would be the "exclusive forum and remedy for such claims."

Meanwhile California, which has a number of Holocaust survivors and descendents, has begun its own policy in dealing with insurers who may have defaulted. In 1999, California passed the Holocaust Victim Insurance Relief Act (HVIRA) that "requires any insurer doing business in the State to disclose information about all policies sold in Europe between 1920 and 1945 by the company or any one 'related' to it upon penalty of loss of its state business license." The Federal Government informed California that HVIRA would interfere with ICHEIC. When California announced that it would ignore the Federal Government's warning, the AIA filed suit challenging the Constitutionality of HVIRA. The District Court granted petitioner's summary judgment, but the Ninth Circuit Court reversed: HVIRA did not violate the federal foreign affairs power. The U.S. Supreme Court, in an opinion written by Justice Souter, joined by Rehnquist, O'Connor, Kennedy and Breyer, reversed the Circuit Court, and ruled California's HVIRA as unconstitutional.

In page after page, Souter argues that California is interfering with the President's constitutional powers. State laws are "preempted" when they have more than an "incidental" effect. HVIRA "interferes with the National Government's conduct of foreign relations." "Vindicating victims injured by acts and omissions of enemy corporations in wartime is…within the traditional subject matter of foreign policy…" "Quite simply, if the California law is enforceable the President has less to offer and less economic and diplomatic leverage as a consequence," and on and on. None of these confusing statements offer any clear guidelines as to what is Constitutional law. I might add, the word: "Traditional" is not a legal word or concept, and nowhere does Souter show where California is violating the Constitution.

Justice Ginsburg, in her dissent (joined by Scalia, Thomas, and Stevens) writes simply "…HVIRA's sole concern: public disclosure…HVIRA 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." In other words, California is saying to insurance companies, "If you want to do business in California, you must disclose your records. If you don't, you can't do business here." How that violates a treaty or the separation of powers, Souter never explains.

While I believe Justice Ginsburg is more concerned with Holocaust survivors than a concept of federalism, I would have thought Rehnquist would see this as a state's rights case. If Rehnquist wanted to be remembered as the Justice who reigned in federal power with his concept of federalism, he has, just in the last month, taken two steps back in Nevada v. Hibbs, and in the most recent, AIA v. Garamendi.

Robert S. Sargent, Jr. is a senior writer at Enter Stage Right and can be reached at rssjr@citcom.net.

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