Bank Powers to Sell Annuities

♦Professor of Law, Boston University School of Law. LL.M, S.J.D., Harvard Law School. 1. 998 F.2d 1295 (5th Cir. 1993), reh'g denied, 13 F.3d 833 (5th Cir. 1994), cert, granted, NationsBank v. Variable Annuity Life Ins. Co., 62 U.S.L.W. 3806 (U.S. June 6, 1994). 2. Id. at 1303. The results and rationale of Variable Annuity Life Ins. Co. v. Clarke are contrary to the holdings of the D.C. Circuit in Indep. Ins. Agents v. Ludwig, 997 F.2d 958 (D.C. Cir. 1993), in which the court approved the Comptroller's interpretation of § 92 of the National Bank Act, 12 U.S.C.S. § 92 (1978) (allowing banks in small communities to sell insurance products) which permitted banks to sell insurance products anywhere else. Ludwig, 997 F.2d at 958 ("The Comptroller determined that § 92 imposes no geographic limits on the insurance market so that, as long as it is located in a small town, a bank is free to solicit and serve insurance customers everywhere. We uphold the Comptroller's interpretation as permissible"). Although the Comptroller's petition for a rehearing and a suggestion for rehearing en bane were denied on January 13, 1994, a dissenting opinion by Judge Jerry E. Smith raises interesting procedural and substantive points. Variable Annuity Life Ins. Co. v. Clark [sic], 13 F.3d 833 (5tn Cir. 1994) (Smith, J., dissenting), cert, granted, NationsBank v. Variable Annuity Life Ins. Co., 62 U.S.L.W. 3806 (U.S. June 6, 1994). First, owing to the recusai of six of the Fifth Circuit's 13 active judges, the original three-judge panel was able to override the four dissenters because "recused judges are counted as members of the court" and a request for an en bane rehearing must be approved by a "majority of the active judges." Id. at 834. Judge Smith opines that "[rjecusal seems to be a particular problem in cases involving large banks and their regulatory agencies (and the attorneys of both) with whom several active judges are likely to have relationships that require them to recuse." Id. at 835. Second, "the panel, in reversing [the] district court['s decision in favor of the Comptroller] has contravened Chevron U.S.A., Inc. v. Natural Resources Defense Council 'by substitut [ing] its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.' " Id. (citations omitted) (quoting Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 844 (1984)). Third, in Judge Smith's view, the panel overlooks the Supreme Court's characterization of variable annuities as securities (rather than insurance policies) which was set out in SEC v. Variable Annuity Life Ins. Co., 359 U.S. 65 (1959). Clark [sic], 13 F.3d at 836-37. That characterization was reaffirmed in John Hancock Mut. Life Ins. Co. v. Harris Trust 8c Sav. Bank, 1 14 S. Ct. 517 (1993), which "constru[ed] ERISA in light of its interpretation of the Securities Act of 1933." 13 F.3d at 837.