American Insurance Association v. Garamendi

In American Insurance Assn v. Garamendi, 539 U.S. 396 (2003), President Clinton entered into an agreement with the German Chancellor in which Germany agreed to establish a foundation to compensate victims of German National Socialist companies. Id. at 405. In exchange, the U.S. government agreed to discourage Holocaust-era claims in American courts and encourage state and local governments to respect the foundation as the exclusive mechanism for resolving these claims. Id. at 405-06. Meanwhile, California passed legislation which required insurance companies doing business in the state to disclose the details of insurance policies issued to people in Europe between 1920 and 1945. Id. at 409. In American Insurance Association v. Garamendi, 539 U.S. 396, 123 S.Ct. 2374, 156 L.Ed.2d 376 (2003), the Supreme Court considered whether a state law, aimed at aiding Holocaust victims by requiring insurers to disclose information about insurance policies sold in Europe before and during World War II, interfered with the federal government's conduct of foreign relations. Id. at 401, 123 S.Ct. 2374. The President had entered into an executive agreement with Germany's chancellor in which the United States agreed that whenever a German company was sued in an American court regarding a Holocaust-era claim, the United States government would submit a statement that adjudicating such a claim was against the United States' "foreign policy interests." Id. at 406, 123 S.Ct. 2374. The Supreme Court observed that "generally,... valid executive agreements are fit to preempt state law, just as treaties are, and if the agreements here had expressly preempted laws like California's law, the issue would be straightforward." Id. at 416-17, 123 S.Ct. 2374. Because an implied conflict existed, the Court ultimately concluded that the state law was preempted. Id. at 420-27, 123 S.Ct. 2374. In addressing California's argument that in the McCarran-Ferguson Act "Congress authorized state laws of the sort California had enacted," the Court said: "As the text itself makes clear, the point of McCarran-Ferguson's legislative choice of leaving insurance regulation generally to the States was to limit congressional preemption under the commerce power, whether dormant or exercised.... A federal statute directed to implied preemption by domestic commerce legislation cannot sensibly be construed to address preemption by executive conduct in foreign affairs." Id. at 427-28, 123 S.Ct. 2374. In American Insurance Ass'n v. Garamendi, 539 U.S. 396, 123 S.Ct. 2374, 156 L.Ed.2d 376 (2003), President Clinton entered into an agreement with the German Chancellor in which Germany agreed to establish a foundation to compensate victims of German National Socialist companies. Id. at 405, 123 S.Ct. 2374. In exchange, the U.S. government agreed to discourage Holocaust-era claims in American courts and encourage state and local governments to respect the foundation as the exclusive mechanism for resolving these claims. Id. at 405-06, 123 S.Ct. 2374. Meanwhile, California passed legislation which required insurance companies doing business in the state to disclose the details of insurance policies issued to people in Europe between 1920 and 1945. Id. at 409, 123 S.Ct. 2374. The Court explained that "even . . . 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." Id. at 420, 123 S.Ct. 2374. The Court held California's law was preempted: "The evidence here is `more than sufficient to demonstrate that the state Act stands in the way of the President's diplomatic objectives.'" Id. at 427, 123 S.Ct. 2374. That is, California's law conflicted with specific foreign relations objectives of the Executive, as "addressed in Executive Branch diplomacy and formalized in treaties and executive agreements over the last half century." Id. at 421, 120 S.Ct. 2288.