The Supreme Court (search) struck down a California law intended to help Holocaust survivors collect on insurance policies from the Nazi era, ruling Monday that the law was unconstitutional meddling by a state in foreign affairs.
The court divided 5-4 to side with the Bush administration, which had urged the court to strike down the law. The administration said the law hurts the government's efforts to speak "with one voice" in international affairs.
The case arose because of what California called a deliberate attempt to stonewall elderly Holocaust (search) survivors or heirs who inquired about dormant policies. The state wanted any insurer doing business there to turn over records of Holocaust-era insurance policies or risk losing their license to do business in the state.
"The basic fact is that California seeks to use an iron fist where the president has consistently chosen kid gloves," Justice David Souter (search) wrote for the majority. "We have heard powerful arguments that the iron fist would work better, and it may be that if the matter of compensation were considered in isolation from all other issues involving the European allies, the iron fist would be the preferable policy."
But, he wrote, "our business is not to judge the wisdom of the national government's policy. Dissatisfaction should be addressed to the president or, perhaps, Congress."
Chief Justice William H. Rehnquist and Justices Sandra Day O'Connor, Anthony M. Kennedy and Stephen Breyer joined Souter.
Justice Ruth Bader Ginsburg (search), with Breyer one of two Jewish justices on the court, read a tart dissent from the bench.
"The judiciary has no warrant to serve as an expositor of the nation's foreign policy," by trumping a state law this way, Ginsburg said.
Lawyers for California argued the law does not interfere with foreign policy. Besides helping Holocaust victims, the law gives consumers information they can use to evaluate insurance companies.
The 1999 law required companies that sold insurance policies in Europe from 1920 to 1945, and which are now affiliated with California insurance companies, to search their records for details of the old policies. The information would go into a public registry. Companies that refused to divulge information could lose their state licenses.
An insurance company trade association and insurers contend California is unconstitutionally trying to regulate insurance business outside its borders. Insurance companies complained that if the California law stands, 50 states could set 50 different requirements.
Insurers have maintained that some of the required information has been lost and that European laws prohibit client information from being given to a third party without the client's consent.
The Bush administration said Holocaust-era claims against foreign insurance companies should be processed through an international commission established in 1998 to settle insurance claims. An agreement signed last fall sets aside $275 million to settle claims and humanitarian programs that benefit Holocaust survivors.
Some heirs have said that policies went unpaid after World War II because insurers asked for documentation such as policies or death certificates -- something impossible to produce for most survivors or heirs of concentration camps or others who fled persecution. Only insurance companies would have that information now, the law's backers claimed.
State insurance regulators and Jewish groups urged the court to uphold the law.
"Callous insurance companies that profited from the Holocaust need secrecy not only to keep the properties they stole from corpses, but to continue to do business today with Californians who would be rightly concerned, for both economic and moral reasons, if they learned the truth," Bet Tzedek Legal Services and the Simon Wiesenthal Center (search) argued in a friend-of-the-court brief.
Around the country, Holocaust survivors and heirs are trying to recover stolen art and money. California has been particularly aggressive in helping victims. Last fall, Gov. Gray Davis (search) signed a bill extending the deadline until 2010 for lawsuits brought in California courts over stolen art that is now housed in museums or galleries.
Under the California law, insurers are required to disclose to the state the number of policies issued, the identity of the holder and beneficiary, the status of the policy and the city of the policyholder.
The 9th U.S. Circuit Court of Appeals in San Francisco upheld the law. A federal appeals court in Atlanta struck down a similar Florida measure.
The cases are American Insurance Association v. Garamendi, 02-722; Gerling Global Reinsurance Corp. of America v. Garamendi, 02-733.