Delaware appeals to Supreme Court

The Delaware Department of Insurance (DDOI) has filed emergency application with the US Supreme Court to stay the proceedings and recall the mandate of the Third Circuit Court of Appeals over the recent case brought against the DDOI by the Internal Revenue Service (IRS).

In April of this year the US Court of Appeals for the Third Circuit ruled that Delaware insurance regulators can not rely on state law preemption to avoid enforcement of IRS summonses seeking their communications with microcaptive companies and managers.

In the filing the DDOI said that the stay was filed pending the timely filing, consideration, and disposition of Applicant’s petition for a Writ of Certiorari.

According to the filing: “This case results from the misapplication by the District Court and Third Circuit Court of Appeals of “reverse-preemption” under the McCarran-Ferguson Act. 15 U.S.C. § 1011 et seq. Specifically, these courts found, in error, that a state insurance regulatory statute did not reverse-preempt a federal statute having nothing to do with insurance regulation.

“This error implicates critical questions of federalism that require Supreme Court intervention to settle the circuit split caused by the Third Circuit Court of Appeals’ interpretation of the McCarran-Ferguson Act, which conflicts with decisions of this Court and all of the other circuit courts that have weighed in on the proper test for reverse-preemption under the McCarran-Ferguson Act.

“Absent emergency relief, the Third Circuit’s precedential opinion and simultaneous issuance of the mandate will cause per se irreparable harm to Applicant. It requires a state insurance commissioner to violate the express command contained in the insurance laws of his own state, an outcome that upends Congress’ stated purpose in enacting the McCarran-Ferguson Act. An emergency stay is necessary because the Third Circuit issued its mandate simultaneously with denying the Applicant’s petition for a stay of the mandate. This places the Department in imminent danger of enforcement of the summons that compels the Delaware Insurance Commissioner to violate Delaware law.”

No information is available yet on if the Supreme Court will issue the stay.