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IN RE AVIATION INS. INDUS.

April 13, 1960

In re Grand Jury Investigation of the AVIATION INSURANCE INDUSTRY


The opinion of the court was delivered by: CASHIN

Nominally, these are motions made by two entities, Associated Aviation Underwriters (AAU) and Aviation Insurance Rating Bureau (AIRB), which have been served with grand jury subpoenas duces tecum, for orders quashing those subpoenas. However, the orders, if granted on the basic ground urged by the movants, would result in a judicial determination not only that the subpoenas presently under attack should be quashed but also that absolutely no authority exists for the Antitrust Division of the Justice Department to conduct any investigation of the aviation insurance industry. Accordingly, I will treat these motions, as I must, as seeking an order quashing not only the particular subpoenas nominally under attack but the entire investigation.

Movant AAU is an association of insurance companies which, in effect, conducts the business of the member insurers insofar as aviation risks are concerned. The types of coverage handled by AAU are --

 (1) aircraft hull insurance;

 (2) aircraft personal injury and death and property liability insurance;

 (3) general liability insurance divided into airport liability, airline ground liability and products liability;

 (4) workmen's compensation and employers' liability insurance; and

 (5) personal accident insurance.

 The vast majority of the contracts of insurance entered into by AAU arise in New York. *fn1"

 AIRB is a rating organization formed under the laws of the State of New York. Membership therein is open to any capital stock insurer authorized to write insurance for which AIRB prescribes rates. Any insurer may become a subscriber to AIRB under conditions set out in its constitution. AIRB prescribes rates for aircraft hull, aircraft passenger liability, aircraft property damage liability and employers' aviation indemnity insurance. It does not prescribe rates for personal accident insurance, workmen's compensation insurance, airport and hangar keepers' liability insurance and aircraft manufacturers' products liability insurance. The precise method of the setting of rates and the extent of their binding force on members of AIRB will not be reviewed, as unnecessary to this decision.

 At the present time, it would appear that the constituency of both of the moving parties is exactly the same.

 The subpoenas currently attacked are grand jury subpoenas. It is clear, however, that even though the subpoena powers of a grand jury impanelled by the District Court for the Southern District of New York are being utilized, no grand jury proceedings, in the sense of actual presentation to the body of evidence with a view toward the obtaining of an indictment or indictments, are presently being conducted. Rather, the investigation is in its preliminary stage and the documents subpoenaed are actually being sought for examination by attorneys of the Antitrust Division of the Department of Justice. This conclusion is impelled by the fact that 'In December 1959, the Attorney General of the United States authorized a grand jury investigation of possible violations of the federal antitrust laws by persons, firms, associations and corporations engaged in the business of insurance'. (Memorandum of the United States in Opposition to Motion to Quash Subpoenas Duces Tecum submitted on the instant motions). *fn2" Because of the time necessary in conducting a widespread antitrust investigation, it is highly unlikely that the case could possibly be in such a posture as to be ready for presentation. This conclusion is buttressed by consideration of the fact that, in connection with this same investigation, the Attorney General's staff, about March 7, 1960, submitted, ex parte, an order which would have provided for the 'impounding' of documents delivered pursuant to a grand jury subpoena duces tecum so that 'attorneys for the United States (could) study, analyze and examine same' at Washington, D.C. *fn3"

 This utilization of grand jury subpoenas for administrative investigations is not new. The Report of the Attorney General's National Committee to Study the Antitrust Laws, submitted on March 31, 1955, stated: (at pg. 344)

 'Present procedures enable the Department of Justice to employ compulsory process to obtain both documentary and testimonial evidence at every stage of criminal and civil antitrust proceedings -- except during the investigative stage of a matter in which civil proceedings are, from the outset, contemplated.

 'Where indictment is contemplated, the federal grand jury is equipped with ample powers to permit the fullest investigation. The grand jury subpoena may be used to compel the discovery of all documentary material reasonably ...


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