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April 27, 1973

United States, Plaintiff
General Adjustment Bureau, Inc., Defendant

Pollack, District Judge.

The opinion of the court was delivered by: POLLACK

POLLACK, District Judge:

The defendant, General Adjustment Bureau, Inc., (GAB hereafter) has applied for a construction of the scope of Section VII of the Final Judgment entered herein by this Court on consent of the parties on April 15, 1971. The suit was brought by the government for alleged violation of the antitrust laws and prior to trial or adjudication of any issue of fact or law the parties agreed on a judgment to be entered. Included therein is a provision that jurisdiction is retained by this Court for the purpose of enabling either of the parties to apply for such orders and directions as may be necessary or appropriate for the construction or carrying out of the Judgment.

 The decree required the insurance company shareholders of approximately 82% of the stock of the defendant to divest themselves of their interests within a fixed period of time through the offices of a Trustee appointed for that purpose. The Trustee was directed to sell the stock in one of three specified ways. It now proposes to do so under an alternative which allows sale to a single purchaser "provided that such purchaser is not an insurance company or a person owned or controlled directly or indirectly by an insurance company."

 United States Trust Company of New York, as Trustee, proposes to recommend to the owners of the stock that they accept an offer from a new corporation, New GAB, to purchase their stock. New GAB will be owned 51% by Unionamerica, Inc. ("UNI") (12% by direct acquisition and 39% on an option which will be exercised) and 49% by an investment partnership comprised of American European Associates Inc. and a group of investors, and by management of New GAB.

 The government opposes the transaction contending that UNI is an "insurance company" within the meaning of the consent decree, or is at least a conduit for a new holding company whose business will principally be insurance.

 UNI is a publicly owned diversified financial holding company whose principal subsidiary is Union Bank, Los Angeles, California, the nineteenth largest commercial bank in the United States. UNI was incorporated in 1967 for the purpose of becoming a holding company to acquire banking and other business interests. Its wholly owned subsidiaries include Swett and Crawford (a wholesale insurance marketing organization and surplus-line broker for commercial lines of property and casualty insurance) and two property and casualty underwriters, viz., Harbor Insurance Company ("Harbor") and Buffalo Insurance Company ("Buffalo"). Swett and Crawford controls Harbor and Buffalo and is responsible for the production of all their direct insurance underwritings. Harbor is authorized to write all classes of insurance except life, title and mortgage; Buffalo is authorized to write fire, marine, casualty and property insurance.

 UNI's 1971 Annual Report reflects that its "Insurance Group" gross premiums were in excess of $91 million in 1971. This group commands a material share of the market in various lines of insurance covering property and casualty risks. The total direct premiums written by Harbor and Buffalo in 1972 was over $50 million.

 UNI does not itself engage in any insurance activities. UNI is subject to regulation as a bank holding company under the Bank Holding Company Act of 1956, as amended by the Bank Holding Company Act Amendments of 1970 (Pub. L. No. 91-607, codified at 12 U.S.C. §§ 1841 et seq.). The Act and regulations thereunder (12 C.F.R. § 225.4(d)) prohibit UNI from retaining after January 1, 1981 any non-bank related interests.

 Under a plan of reorganization Union Bank will be separated from UNI's other activities and a new bank holding company will be created which will own Union Bank and certain bank-related activities, and a second new holding company will own UNI's other subsidiaries and divisions, including insurance activities. It is estimated, using 1971 figures, that this second new holding company will derive 62% of its gross revenues from insurance business. It is anticipated that the planned organization will be consummated late in 1973.

 During the five years ended December 31, 1971, commercial banking contributed an average of over 80% of UNI's gross revenues while gross revenues from insurance averaged under 12%. UNI's income after taxes from these sources was in approximately the same proportions, viz., about 81% and 9%. Manifestly, insurance activities were not a predominant part of UNI's business.

 The sole issue at this time is whether UNI may become the purchaser of GAB stock or whether it is to be deemed an insurance company and thus barred from the proposed transaction.

 There is no specific definition of an insurance company in the antitrust laws. An "insurance company" has been twice specifically defined by Congress in the securities laws as one "whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies." 15 U.S.C. § 80a-2 (a)(17). See also Bowers v. Lawyers Mortgage Co., 285 U.S. 182, 188-90, 76 L. Ed. 690, 52 S. Ct. 350 (1932); United States v. Home Title Insurance Co., 285 U.S. 191, 195, 76 L. Ed. 695, 52 S. Ct. 319 (1932); National Commercial Title & Mortgage Guaranty Co. v. Duffy, 132 F.2d 86, 89 (3d Cir. 1942).

 The government directs attention to the underlying "purpose" of the decree to support its contention that UNI is in the class of prohibited purchasers, contending "that the intent of the parties as manifested in the Judgment is to have New GAB owned or controlled by interests which are wholly independent from insurance interests." It argues that failure to give effect to such an intention, although unexpressed in the decree itself, will give rise to all of the evils which the government sought to prevent when it filed its original complaint herein, charging that defendant, all of whose stock was owned by approximately 170 insurance companies, had combined and conspired with its shareholders in violation of Sections 1 and 3 of the Sherman Act by causing said shareholders, inter alia, to utilize defendant's adjusting facilities, boycott independent adjusters, and coerce and intimidate agents to channel claims to defendant. It was also charged that defendant and its insurance company shareholders had established uniform practices and procedures to be used in the adjustment and settlement of claims. In addition, it was alleged that the conspiracy as charged had the effect of eliminating competition among the shareholder insurance companies in the adjustment and settlement of claims and denying insureds the benefits of such competition.

 A lengthy exposition of these presumed evils is set forth. The government contends that the intent of the parties as indicated by the plan and use of language in the decree was to prevent any company which is related to insurance ...

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