MR. JUSTICE BLACK delivered the opinion of the Court.
In an effort to protect its citizens from "unfairness, imposition or fraud" in sales of certificates of insurance and other forms of securities, the Virginia "Blue Sky Law" requires those selling or offering such securities to obtain a permit from the State Corporation Commission.
While violation of the Act is a misdemeanor punishable by criminal sanctions, § 6 provides another method for enforcement. After notice and a hearing "on the merits," the State Corporation Commission is authorized to issue a cease and desist order restraining violations of the Act. The section also provides for service by registered mail where other types of service are unavailable "because the offering is by advertisement and/or solicitation through periodicals, mail, telephone, telegraph, radio, or other means of communication from beyond the limits of the State . . . ." The highest court of Virginia rejected contentions that this section violates constitutional requirements of due process, and the case is properly here on appeal under 28 U. S. C. § 1257 (2).
In this case cease and desist proceedings under § 6 were instituted by the State Corporation Commission against Travelers Health Association and against R. E. Pratt, as treasurer of the Association and in his personal capacity. Having received notice by registered mail only, they appeared "specially" for "the sole purpose of objecting to the alleged jurisdiction of the Commonwealth of Virginia and of its State Corporation Commission, and of moving to set aside and quash service of summons. . . ." The agreed stipulation of facts and certain exhibits offered by the state can be summarized as follows:
The appellant Travelers Health Association was incorporated in Nebraska as a nonprofit membership association in 1904. Since that time its only office has been located in Omaha, from which it has conducted a mailorder health insurance business. New members pay an initiation fee and obligate themselves to pay periodic
The Commission, holding that the foregoing facts supported the state's power to act in § 6 proceedings, overruled appellants' objection to jurisdiction and their motion to quash service. The Association and its treasurer were ordered to cease and desist from further solicitations or sales of certificates to Virginia residents "through medium of any advertisement from within or from without the State, and/or through the mails or otherwise, by intra- or inter-state communication, . . . unless and until" it obtained authority in accordance with the "Blue Sky Law." This order was affirmed by the Virginia Court of Appeals. 188 Va. 877, 882, 51 S.E.2d 263, 271.
Appellants do not question the validity of the Virginia law "to the extent that it provides that individual and corporate residents of other states shall not come into the State for the purpose of doing business there without first submitting to the regulatory authority of the State." As to such state power see, e. g., Hall v. Geiger-Jones Co., 242 U.S. 539. Their basic contention is that all their activities take place in Nebraska, and that consequently
Appellants' chief reliance for the due process contention is on Minnesota Assn. v. Benn, 261 U.S. 140. There a Minnesota association obtained members in Montana by the same mail solicitation process used by Travelers to get Virginia members. The certificates issued to Montana members also reserved the right to investigate claims, although the Court pointed out that Benn's claim had not been investigated. This Court held that since the contracts were "executed and to be performed" in Minnesota, the Association was not "doing business" in Montana and therefore could not be sued in Montana courts unless "consent" to Montana suits could be implied. The Court found the circumstances under which the insurance transactions took place insufficient to support such an implication.
But where business activities reach out beyond one state and create continuing relationships and obligations with citizens of another state, courts need not resort to a fictional "consent" in order to sustain the jurisdiction of regulatory agencies in the latter state. And in considering what constitutes "doing business" sufficiently to justify regulation in the state where the effects of the "business" are felt, the narrow grounds relied on by the Court in the Benn case cannot be deemed controlling.
In Osborn v. Ozlin, 310 U.S. 53, 62, we recognized that a state has a legitimate interest in all insurance policies protecting its residents against risks, an interest which the state can protect even though the "state action may have repercussions beyond state lines . . . ." And in Hoopeston
Measured by the principles of the Osborn, Hoopeston and International Shoe cases, the contacts and ties of appellants with Virginia residents, together with that state's interest in faithful observance of the certificate obligations, justify subjecting appellants to cease and desist proceedings under § 6. The Association did not engage in mere isolated or short-lived transactions. Its insurance certificates, systematically and widely delivered in Virginia following solicitation based on recommendations of Virginians, create continuing obligations between the Association and each of the many certificate holders in the state. Appellants have caused claims for losses to be investigated and the Virginia courts were available to them in seeking to enforce obligations created by the group of certificates. See International Shoe Co. v. Washington, supra, at 320.
Moreover, if Virginia is without power to require this Association to accept service of process on the Secretary of the Commonwealth, the only forum for injured certificate holders might be Nebraska. Health benefit
There is, of course, one method by which claimants could recover from appellants in Virginia courts without the aid of substituted service of process: certificate holders in Virginia could all be garnished to the extent of their obligations to the Association. See Huron Corp. v. Lincoln Co., 312 U.S. 183, 193. While such an indirect procedure would undeniably be more troublesome to claimants than the plan adopted by the state in its "Blue Sky Law," it would clearly be even more harassing to the Association and its Virginia members. Metaphysical concepts of "implied consent" and "presence" in a state should not be solidified into a constitutional barrier against Virginia's simple, direct and fair plan for service of process on the Secretary of the Commonwealth.
We hold that Virginia's subjection of this Association to the jurisdiction of that State's Corporation Commission in a § 6 proceeding is consistent with "fair play and substantial justice," and is not offensive to the Due Process Clause.
Appellants concede that in the Osborn and Hoopeston cases we sustained state laws providing protective standards for policyholders in those states, even though compliance with those standards by the insurance companies could have repercussions on similar out-of-state contracts. It is argued, however, that those cases are distinguishable because they both involved companies which were "licensed to do business in the state of the forum and were actually doing business within the state . . . ." But while Hoopeston Canning Co. had done business in New York under an old law, it brought the case here to challenge certain provisions of a new licensing law with which it had to comply if it was to do business there in the future. Thus it was seeking the same kind of relief that appellants seek here, and for the same general purpose. What we there said as to New York's power is equally applicable to Virginia's power here.
It is also suggested that service of process on appellants by registered mail does not meet due process requirements.
The due process questions we have already discussed are the only alleged errors relied on in appellants' brief,
MR. JUSTICE DOUGLAS, concurring.
Since the formula adopted by the Court is adequate to dispose of this case, I have joined in the opinion. But I feel that the type of problem presented requires a more selective treatment. Hence my separate opinion.
That the business of insurance is interstate commerce is established by United States v. South-Eastern Under-writers Assn., 322 U.S. 533. Any doubts about the power of a state to exclude an interstate insurance company which refuses to comply with its regulatory laws were dispelled by the passage of the McCarran Act. 59 Stat. 33, 15 U. S. C. §§ 1011-1015. See Robertson v. California, 328 U.S. 440, 461, 462.
The requirements of due process do not, in my opinion, preclude the extension of Virginia's regulatory scheme to appellant. I put to one side the case where a policyholder seeks to sue the out-of-state company in Virginia.
Blue Sky Laws are a well-recognized exercise of the police power of the states. See Hall v. Geiger-Jones Co., 242 U.S. 539, 552. The wiles of the salesman have been many; the devices to avoid state regulation have been clever and calculated. One of those who contested the constitutionality of the Michigan Blue Sky Law in Merrick v. Halsey & Co., 242 U.S. 568, 573, had no place of business in the state and was not sending agents into it. The history of the various methods used to evade state regulation is too recent to require extended comment. Instrumentalities of interstate and foreign commerce were extensively employed by those beyond the reach of a state to sell securities to its citizens. See H. R. Rep. No. 85, 73d Cong., 1st Sess. 10. The Securities Act of 1933 (48 Stat. 74, 15 U. S. C. § 77a et seq.) was passed to fill the gap.
A state is helpless when the out-of-state company operates beyond the borders, establishes no office in the state, and has no agents, salesmen, or solicitors to obtain
Practically all of appellants' business in Virginia originates with and is the result of the activities of its Virginia members. The recommendation of a member relieves an applicant of the duty of furnishing any reference. Though the old members are not designated as "agents," it "clearly appears," as stated by the Supreme Court of Appeals, "that the association relies almost exclusively on these activities of its Virginia members to bring about an expansion of its Virginia business." Travelers Health Assn. v. Virginia, 188 Va. 877, 887; 51 S.E.2d 263, 267. This device for soliciting business in Virginia may be unconventional and unorthodox; but it operates functionally precisely as though appellants had formally designated the Virginia members as their agents. Through these people appellants have realistically entered the state, looking for and obtaining business. Whether such solicitation is isolated or continuous, it is activity which Virginia can regulate. See Hooper v. California, 155 U.S. 648, 658. The requirements of due process may demand more or less
I cannot agree that this appeal is premature. Virginia has placed an injunction on appellants, an injunction which may have numerous consequences, e. g., contempt proceedings. There is an existing controversy—real and vital to appellants.
MR. JUSTICE MINTON, with whom MR. JUSTICE JACKSON joins, dissenting.
The State Corporation Commission of Virginia instituted the proceedings leading to the cease and desist order entered in the instant case under § 6 of the Virginia Securities Law. Michie's Va. Code, 1942, § 3848 (52). That section provides for service by registered mail upon persons or corporations offering securities through the mails or by other means of communication. After hearing, the Commission is authorized to issue the order and to give it such publicity as the Commission considers desirable.
In this case no action has been taken under § 15 of the Law which provides that violation of the statute is a misdemeanor and punishable by fine, or under § 17 which provides for the imposition of a fine upon failure to comply with a lawful order of the Commission. Michie's Va. Code, 1942, § 3848 (61) (63). The Commission has in no way attempted to enforce the order issued by the Commission against appellants. Therefore appellants have not been hurt, and the question of due process is not reached. In the scheme of the statute, publicity appears to be the sole sanction of § 6. I know of no reason why Virginia may not go through this
The question of substituted service on the Secretary of the Commonwealth is not here in any aspect. As far as appears, service in this manner is not authorized by the Virginia statutes except where the nonresident has opened and is conducting a place of business within the State. Michie's Va. Code, 1942, § 3848 (55)a. Up to this date Virginia has not claimed the power to require appellants, who do business in Virginia only by mail, to appoint the Secretary of the Commonwealth as their agent for service of process, nor have the courts of Virginia rendered judgment in a suit where service was made in that manner. I do not understand, therefore, what possible application the Court's reference to substituted service on the Secretary of the Commonwealth could have in this case. I would answer the question of due process when Virginia has attempted to apply its process to appellants in a proceeding that has consequences of a nature which entitle a person to the protection of the Due Process Clause. See Parker v. Los Angeles County, 338 U.S. 327. I would, therefore, dismiss the appeal.
As stated, it seems to me that the majority opinion is saying that Virginia has more power than it claims in the instant proceeding. While Virginia has not attempted to do more than publicize the activities of appellants in the State, I read the majority opinion to intimate that under the service by registered letter Virginia might go further. The cease and desist order issued cannot validly compel appellants to designate the Secretary of the Commonwealth as their agent for service of process, any more than
Service by registered mail is said by the majority to be sufficient where the corporation has "minimum contacts" with the state of the forum. How many "contacts" a corporation or person must have before being subjected to suit we are not informed. Here all of appellants' contacts with the residents of Virginia were by mail. No agent of appellant corporation has entered the State, nor has the individual appellant. The contracts were made wholly in Nebraska. Under these circumstances, I would hold that appellants were never "present" in Virginia.
As I understand the International Shoe Co. case, the minimum contacts which a corporation has in the State
We are not dealing here with the power of Virginia to regulate the transaction of insurance business with its citizens, as was the case in Osborn v. Ozlin, 310 U.S. 53, and Hoopeston Co. v. Cullen, 318 U.S. 313. In the case at bar we are concerned only with how Virginia may enforce such power as it has. No question of the sufficiency of service was involved in either the Osborn or the Hoopeston case, both of which were brought against some officer of a state. The question in those cases was whether the State had power, and not whether, having the power, it had also acquired jurisdiction of a defendant against whom a judgment could be rendered enforcing that power.
I would not attempt to instruct Virginia as to how to protect its citizens from these intruders from Nebraska. But I do not believe we should even intimate that judgments in personam may be obtained, by the simple process of sending a registered letter, against a corporation whose agents have never been in the forum where suit is brought, or against a natural person who is not personally served within the State.
MR. JUSTICE REED and MR. JUSTICE FRANKFURTER, agreeing with the Court in reaching the merits, on the merits join this dissent.