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CONSUMERS UNION OF UNITED STATES, INC. v. ALBRIGHT

February 25, 1977

CONSUMERS UNION OF UNITED STATES, INC., et al., Plaintiffs,
v.
Harry W. ALBRIGHT, Jr., Superintendent of Banks of the State of New York, Defendant



The opinion of the court was delivered by: GAGLIARDI

GAGLIARDI, District Judge.

Plaintiffs move pursuant to Rule 56 Fed. R.Civ.P. for summary judgment seeking to permanently enjoin the enforcement, operation and execution of Sections 266 and 268 of the Banking Law of the State of New York. N.Y.Bank.Law §§ 266 & 268 (McKinney 1971). Plaintiffs allege that these provisions which relate to savings bank life insurance are violative of various provisions of the Constitution of the United States and of the Constitution of the State of New York. Jurisdiction is based on 28 U.S.C. §§ 1331(a) and 1343(3).

This action was commenced on January 14, 1974; a three-judge court was ordered convened pursuant to a memorandum decision and order of September 20, 1974. The three-judge court was duly convened and an oral argument was held on July 13, 1976. For the reasons stated herein, this court, pursuant to the discretionary power granted in Rule 54(c) Fed.R.Civ.P., grants summary judgment in favor of the defendant. *fn1"

 Plaintiffs are Consumers Union of United States, Inc., a New York non-profit membership corporation, Edward J. Gorin, an individual who resides and regularly works in New Jersey, and Ira J. Furman, an individual who resides in New Jersey but regularly works in New York. *fn2" Defendant is the Superintendent of Banks of the State of New York. *fn3"

 Article VI-A of the Banking Law of New York entitles any savings bank subject to New York law to sell life insurance ("savings bank life insurance" or "SBLI") by establishing a life insurance department. N.Y.Bank.Law § 261 et seq. (McKinney 1971). In this case plaintiff Gorin attempted to buy $30,000 of savings bank life insurance and was refused on the ground that such a purchase would violate Section 268 of New York's Banking Law which prohibits the sale of an SBLI policy to any person who neither resides nor regularly works in New York State. *fn4" Plaintiff Furman attempted and was denied the opportunity to purchase a $40,000 savings bank life insurance policy. Such a purchase would be in violation of Section 266 of New York's Banking Law which prohibits the sale of an SBLI policy in an amount in excess of $30,000 or in an amount which, together with other SBLI policies already in force on the life of the applicant, would exceed $30,000. *fn5"

 Plaintiffs contend that these two sections violate the equal protection clauses of the Federal and New York State Constitutions. U.S.Const. amend. XIV, § 1 and N.Y.Const. art. I, § 11. They also contend that the two sections violate the due process clause of the New York State Constitution, art. I, § 6; the commerce clause of the Federal Constitution, art. I, § 8, cl. 3; and 42 U.S.C. § 1983. Additionally, plaintiffs argue that Section 268 violates the privileges and immunities clauses of the Federal Constitution. Art. IV, § 2, cl. 1 and amend. XIV, § 1.

 SECTION 268: Geographical Limitation

 Equal Protection

 Plaintiffs allege that Section 268 violates the equal protection clauses of the federal and state Constitutions, U.S.Const. amend. XIV § 1 and N.Y.Const. art. I, § 11, in discriminating between residents of New York and nonresidents by prohibiting almost all of the latter from purchasing SBLI, *fn6" while permitting all residents to purchase SBLI. For the purposes of this action there is no difference in intent, meaning or interpretation between the equal protection clauses in the state and federal Constitutions. See Gleason v. Gleason, 26 N.Y.2d 28, 41, 308 N.Y.S.2d 347, 356, 256 N.E.2d 513, 520 (1970); Bauch v. City of New York, 21 N.Y.2d 599, 607, 289 N.Y.S.2d 951, 955, 237 N.E.2d 211, 214, cert. denied, 393 U.S. 834, 89 S. Ct. 108, 21 L. Ed. 2d 105 (1968). As a result, the analysis under the federal equal protection clause is applicable and dispositive of the state equal protection claim.

 Under an equal protection analysis, Section 268 creates a discriminatory classification. Section 268 distinguishes between residents or those regularly employed in New York and nonresidents. With respect to their access to inexpensive life insurance, these two classes are not equal and the classification must be considered to be discriminatory. *fn7"

 The next requirement in an equal protection challenge is to determine what standard the court should apply in reviewing the discriminatory classification. The Supreme Court has consistently recognized that a state has broad discretion in enacting social and economic legislation, like the Banking Law in the case at bar, and has applied the "reasonable relation" test to the review of such legislation. See City of New Orleans v. Dukes, 427 U.S. 297, 96 S. Ct. 2513, 49 L. Ed. 2d 511 (1976); San Antonio Independent School District v. Rodriguez, 411 U.S. 1, 93 S. Ct. 1278, 36 L. Ed. 2d 16 (1973); Jefferson v. Hackney, 406 U.S. 535, 92 S. Ct. 1724, 32 L. Ed. 2d 285 (1972); Dandridge v. Williams, 397 U.S. 471, 90 S. Ct. 1153, 25 L. Ed. 2d 491 (1970); McGowan v. Maryland, 366 U.S. 420, 81 S. Ct. 1101, 6 L. Ed. 2d 393 (1961); Williamson v. Lee Optical Co., 348 U.S. 483, 75 S. Ct. 461, 99 L. Ed. 563 (1955). As the Supreme Court set forth in Dandridge v. Williams, supra, 397 U.S. at 485, 90 S. Ct. at 1161:

 
In the area of economics and social welfare, a State does not violate the Equal Protection Clause merely because the classifications made by its laws are imperfect. If the classification has some "reasonable basis," it does not offend the Constitution simply because the classification "is not made with mathematical nicety or because in practice it results in some inequality." Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78, 31 S. Ct. 337, 340, 55 L. Ed. 369 [1911]. "The problems of government are practical ones and may justify, if they do not require, rough accommodations -- illogical, it may be, and unscientific." Metropolis Theatre Co. v. City of Chicago, 228 U.S. 61, 69-70, 33 S. Ct. 441, 443, 57 L. Ed. 730 [1913].

 A stricter standard of review can only be applied when there is an identifiable "suspect classification" see, e.g., Loving v. Virginia, 388 U.S. 1, 87 S. Ct. 1817, 18 L. Ed. 2d 1010 (1967) (race); Graham v. Richardson, 403 U.S. 365, 91 S. Ct. 1848, 29 L. Ed. 2d 534 (1971) (alienage) or "fundamental interest" at issue. See, e.g., Dunn v. Blumstein, 405 U.S. 330, 92 S. Ct. 995, 31 L. Ed. 2d 274 (1972) (right to vote); Shapiro v. Thompson, 394 U.S. 618, 89 S. Ct. 1322, 22 L. Ed. 2d 600 (1969) (right to travel). No such classification or interest *fn8" is at issue in this case.

 Under the "rational relation" test, there is a presumption of constitutional validity attached to the legislative classification, and the plaintiffs have the burden of demonstrating that Section 268 does not bear a reasonable or rational relation to a legitimate governmental interest of the State of New York. See City of New Orleans v. Dukes, supra, 427 U.S. at 303-306, 96 S. Ct. at 2517; Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 96 S. Ct. 2488, 2499, 49 L. Ed. 2d 220 (1976); Madden v. Kentucky, 309 U.S. 83, 60 S. Ct. 406, 84 L. Ed. 590 (1940). "A statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it." McGowan v. Maryland, supra, 366 U.S. at 426, 81 S. Ct. at 1105.

 This court recognizes that New York State, pursuant to its police powers can choose to allow savings banks to sell life insurance or not within the limits of the equal protection clause of the Constitution. In choosing to restrict the sale of SBLI to state residents and individuals who work in New York, the legislature was not acting to protect the state fisc as is often the reason for passing such regulations. See, e.g., Geduldig v. Aiello, 417 U.S. 484, 495-96, 94 S. Ct. 2485, 41 L. Ed. 2d 256 (1974) (upholding California's disability insurance program's exclusion of normal pregnancies to avoid state subsidy and for other reasons); Dandridge v. Williams, supra (upholding Maryland's administration of an aspect of its public welfare program). In fact, the New York law expressly prohibits the use of "public money" for the SBLI system. *fn9"

 However, the state does have legitimate economic and social interests in limiting sales of SBLI policies to persons living or working in the state. The first and most important state interest is to provide a benefit and security to its taxpayers or those with an economic nexus (residence or work) to the state. Attracting people to the state to live or work is a legitimate state interest which justifies limiting SBLI under Section 268. This geographic limit is also consistent with the state controlled role of savings banks as local institutions. For example, the state specifically regulates savings banks' investments in mortgages on owner occupied one-and two-family residences located outside of New York or outside a 50 mile radius from the bank's principal office. N.Y.Bank.Law § 235(6) (McKinney 1971). Additionally, the restrictions on SBLI to protect the life insurance industry and to protect savings banks from allowing insurance activities to prosper at the expense of traditional banking functions is a legitimate exercise of the state's power. As a result, this court cannot say that one or more of these goals is not a legitimate governmental interest rationally promoted by the Section 268 requirement here in issue. See ...


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