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CARROLL v. GREENWICH INSURANCE COMPANY NEW YORK

November 27, 1905

CARROLL
v.
GREENWICH INSURANCE COMPANY OF NEW YORK



APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF IOWA

Fuller, Harlan, Brewer, Brown, White, Peckham, McKenna, Holmes, Day

Author: Holmes

[ 199 U.S. Page 407]

 MR. JUSTICE HOLMES delivered the opinion of the court.

This is a bill brought by a number of fire insurance companies, incorporated in States other than Iowa, to enjoin the auditor of that State from enforcing §§ 1754, 1755 and 1756 of the Iowa Code, 1897. The ground of the bill is that these sections are invalid under the state constitution and the Fourteenth Amendment of the Constitution of the United States. There is a reference also to Article 1, section 10, and an oblique suggestion that the law impairs the obligation of contracts. The defendant demurred, and the Circuit Court issued an injunction as prayed, which was made perpetual by final decree. 125 Fed. Rep. 121. Thereupon the defendant appealed to this court.

By section 1754, "It shall be unlawful for two or more fire insurance companies doing business in this State, or for the officers, agents or employes of such companies, to make or enter into any combination or agreement relation to the rates to be charged for insurance, the amount of commissions to be allowed agents for procuring the same, or the manner of transacting the fire insurance business within this State; and any such company, officer, agent or employe violating this provision provision

[ 199 U.S. Page 408]

     shall be guilty of a misdemeanor," and a fine is imposed for each offense. By § 1755 it is made the duty of the auditor of state to summon for examination, under oath, any officer, agent or employe suspected of violating § 1754, and if he determines that the company is guilty, or if the officer or agent fails to appear, to revoke the authority of the company to do business in the State for one year. By § 1756 an appeal is given from the decision of the auditor to the District Court, the case to be tried de novo, as equitable causes are tried. By § 1757 the statements made upon the examination before the auditor or county court shall not be used in any criminal prosecution against the person making them.

The bill sets forth the necessity for every insurance company to gather all the experience available into one mass and to analyze and classify it scientifically in order to ascertain the true value of risks, and that it will add greatly to the expense if each company is required to employ a separate person to do the work. It charges, upon information and belief, that it the plaintiffs attempt to combine their experience and to employ the same person to analyze it, the auditor will summon them and revoke their authority to do business in the State. It further alleges that the plaintiffs desire not only to do what has been stated for their guidance in establishing rates, but to agree what classes of risks are non-insurable, how various risks shall be classified, and as to other matters relating to the manner of doing business. It repeats the charge, upon information and belief, that if the plaintiffs proceed in this manner the auditor will order an examination and revoke their licenses, and prays for an injunction against enforcing in any manner the above-mentioned sections of the Iowa Code. The Circuit Court considered that the statute was not invalid under the constitution of Iowa, but held that the prohibitions of agreements as to the amount of commissions to be allowed, or as to the manner of transacting the fire insurance business in the State, were contrary to the Fourteenth Amendment. While waiving a discussion of the clause against combinations

[ 199 U.S. Page 409]

     as to rates, it seemingly regarded the provisions of § 1754 as inseparable, and issued a general injunction forbidding the enforcement against the plaintiffs of §§ 1754, 1755 and 1756.

We assume, for purposes of decision, that the bill means that the auditor threatens and intends to enforce the act in case the plaintiffs do what they desire to do, and that if § 1754 is contrary to the Constitution of the United States, a proper case for an injunction is made out. Osborn v. Bank of the United States, 9 Wheat. 738 839, 840. See Cleveland v. Cleveland City Ry. Co., 194 U.S. 517, 531; Detroit v. Detroit Citizens' Street Ry. Co., 184 U.S. 368, 378. We assume further that the position of the plaintiffs is not affected by the fact that they are foreign corporations. The act is in general terms, and hits all insurance companies. If it is invalid as to some, it is invalid as to all. United States v. Ju Toy, 198 U.S. 253, 262, 263. That the requirements of the act might have been made conditions to foreign companies doing business in the State, Fidelity Mutual Life Ins. Co. v. Mettler, 185 U.S. 308, Waters-Pierce Oil Co. v. Texas, 177 U.S. 28, is immaterial, since, as we understand the statute, the legislature did not attempt to reach the result in that way. A company lawfully doing business in the State is no more bound by a general unconstitutional enactment than a citizen of the State. W. W. Cargill Co. v. Minnesota, 180 U.S. 452.

We pass to the question upon which the Circuit Court decided the case, namely, the constitutionality of § 1754, the only section which we find it necessary to consider. Whatever may be thought of the policy of such attempts, it cannot be denied in this court, unless some of its decisions are to be overruled, that statutes prohibiting combinations between possible rivals in trade may be constitutional. The decisions concern not only statutes of the United States, Northern Securities Co. v. United States, 193 U.S. 197, Swift & Company v. United ...


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