1. Where a bill for an injunction alleges that threatened action
by defendant state executive officials, under a state statute as
construed by them, will deprive plaintiff of rights under the
Fourteenth Amendment, jurisdiction of the district court does not
depend on presence of an allegation that the statute itself is
unconstitutional, since the amendment binds the state in all its
branches. P. 270 U. S.
2. A state cannot use its power to exclude a foreign corporation
from local business as a means of accomplishing that which is
Page 270 U. S. 427
to the state, such a the regulation of conduct in another
jurisdiction. P. 270 U. S.
3. Section 2820 of the 1915 Code of New Mexico, as amended in
1921, which purports to make it
"unlawful for any insurance company authorized to do business in
New Mexico. . . . to pay. . . . either directly or indirectly, any
fee, brokerage or other emolument of any nature to any person, firm
or corporation not a resident of the New Mexico for the obtaining,
placing, or writing of any policy or policies of insurance covering
risks in New Mexico,"
and provides that any insurance company violating it shall have
its certificates of authority to do business in the state suspended
for not less than one year, the suspension to be removed only upon
a written pledge that the section will be observed, held
unconstitutional. P. 270 U. S.
4. The repeal of the section did not render this case moot,
since, in view of a provision of the state constitution that "no
act of the legislature shall affect the right or remedy of either
party. . . . in any pending case," it is uncertain whether the
plaintiff might not still be held liable to lose its license. P.
270 U. S.
Appeal from the decree of the district court which dismissed the
bill in a suit to enjoin the State Corporation Commission of New
Mexico from suspending the license of the plaintiff to do business
in that state.
Page 270 U. S. 432
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a bill in equity brought to prevent the State
Corporation Commission of New Mexico from suspending the right of
the plaintiff to do business in that state. A final decree was
entered by which it was declared that the defendants intend to
suspend that right
"for the sole
Page 270 U. S. 433
reason that the plaintiff has made payments to its agents in
states other than New Mexico in connection with the procurement of
business made, written, and placed by the plaintiff in New
that such payments are unlawful by virtue of § 2820 of the New
Mexico Code of 1915, as amended by Chapter 195 of the Laws of 1921,
and that the section, so far as it makes such payments unlawful and
authorizes the suspension because of this, is constitutional. On
this ground, the bill was dismissed. The plaintiffs, contending
that the statute as construed and applied is contrary to the
Fourteenth Amendment, appealed to this Court.
The statute in question, § 2820 of the Code of 1915 as amended
in 1921, purports to make it
"unlawful for any insurance company authorized to do business in
New Mexico . . . to pay, . . . either directly or indirectly, any
fee, brokerage, or other emolument of any nature to any person,
firm, or corporation not a resident of the New Mexico for the
obtaining, placing, or writing of any policy or policies of
insurance covering risks in New Mexico. Any insurance company
violating this section shall have its certificates of authority to
do business in this state suspended for not less than one
the suspension to be removed only upon a written pledge that the
section will be observed. This section has been repealed by an act
of 1925, which substitutes the more moderate requirement that the
policy must be delivered, the premium collected, and the full
commission retained, by an agent in New Mexico, with authority to
that agent to employ a licensed nonresident broker to collect the
premiums, etc., and to pay him within limits. The question has been
suggested whether this repeal does not require us to dismiss the
case. But the Constitution of New Mexico provides that "no act of
the legislature shall affect the right or remedy of either party .
. . in any pending case." It is at least
Page 270 U. S. 434
possible that the state courts might hold that the plaintiff was
still liable to lose its license on the old ground. Therefore it
seems to us just that we should proceed to deal with the further
questions raised, as both parties desire.
It is suggested that the district court had no jurisdiction
because the bill does not allege that the statute is
unconstitutional, but only that the statute, as construed and
applied by the defendants, is so. But even if the statute did not
plainly purport to justify and require the threatened action, or if
the bill fairly taken did not import a denial of the
constitutionality of the law as applied to this case, the plaintiff
still would be entitled to come into a court of the United States
to prevent such an alleged violation of its constitutional rights.
Raymond v. Chicago Traction Co., 207 U. S.
; Home Telephone & Telegraph Co. v. Los
Angeles, 227 U. S. 278
Cuyahoga River Power Co. v. Akron, 240 U.
Coming, then, to the merits, we assume in favor of the
defendants that the state has the power and constitutional right
arbitrarily to exclude the plaintiff without other reason than that
such is its will. But it has been held a great many times that the
most absolute seeming rights are qualified, and in some
circumstances become wrong. One of the most frequently recurring
instances is when the so-called right is used as part of a scheme
to accomplish a forbidden result. Frick v. Pennsylvania,
268 U. S. 473
American Bank & Trust Co. v. Federal Reserve Bank of
Atlanta, 256 U. S. 350
256 U. S. 358
Badders v. United States, 240 U.
, 240 U. S. 394
United States v. Reading Co., 226 U.
, 226 U. S. 357
Thus, the right to exclude a foreign corporation cannot be used to
prevent it from resorting to a federal court, Terral v. Burke
Construction Co., 257 U. S. 529
to tax it upon property that, by established principles the state
has no power to tax, Western Union Telegraph Co. v.
Kansas, 216 U. S. 1
Page 270 U. S. 435
other cases in the same volume and later that have followed it;
or to interfere with interstate commerce, Sioux Remedy Co. v.
Cope, 235 U. S. 197
235 U. S. 203
Looney v. Crane Co., 245 U. S. 178
245 U. S. 188
Western Union Telegraph Co. v. Foster, 247 U.
, 247 U. S. 114
A state cannot regulate the conduct of a foreign railroad
corporation in another jurisdiction, even though the company has
tracks and does business in the state making the attempt. New
York, Lake Erie & Western R. Co. v. Pennsylvania,
153 U. S. 628
153 U. S.
The case last cited was one of an attempt to regulate the
corporation's payments in another state. By the same principle on
even stronger grounds, the corporation cannot be prevented from
employing and paying those whom it needs for its business outside
the state. The difficulty was fully appreciated by the counsel for
the appellee, and he therefore sought to limit the generality of
the words, at least in the case of agents, and to make out that the
object was to prevent the use of dummy agents in the state. It was
suggested that agents were paid by commissions at well known
conventional rates, and that the statute meant to forbid the
dividing of these commissions, and in that way to prevent the work
being done and paid for elsewhere, while nominal agents in New
Mexico were paid small sums for the use of their names. In short,
it is said the purpose was to secure responsible men to represent
the company on the spot. But, whether such an interpretation would
save the act or not, it is impossible to limit it in that way. It
forbids the payment of any emolument of any nature to any person
for the obtaining, placing, or writing of any policy covering risks
in New Mexico. The words go beyond any legitimate interest of the
state, and although the decree is based only on payments to agents,
it does not declare that the payments thus made prevented the
payment of appropriate commissions to the agents in the state, nor
does the statute limit its prohibition in that way.
Page 270 U. S. 436
The determination of the Commission to suspend the plaintiff
purported to be based upon a letter written by it in reply to a
notice. In this letter, it appeared only that agents or branch
offices in other states were paid for services of value by
commission on such basis as was agreed upon outside of New Mexico,
but not that there was in any case a deduction from appropriate
commissions inside the state. The threat and the decree therefore
test the validity of the statute in its extreme application, and
furnish no ground for an attempt to read it as meaning less than it
says. See further Palmetto Fire Insurance Co. v.
Beha, 13 F.2d
; St. Louis Compress Co. v. Arkansas, 260 U.
The separate opinion of MR. JUSTICE McREYNOLDS.
This cause was begun January 8, 1924. Defendants were the
members of the State Corporation Commission and the bank examiner.
Section 2814, Code of New Mexico 1915, forbade the carrying on of
business within the state by any insurance company
"unless it shall procure from the superintendent of insurance a
certificate stating that the requirements of the laws of this state
have been complied with, and authorizing it to do business."
These certificates expired annually on the last day of February.
In 1921, the powers and duties of the superintendent of insurance
were transferred to the bank examiner under general control and
supervision of the Corporation Commission.
Section 2820 of the Code, as amended, provided that no foreign
insurance company shall transact business in the state except
through duly appointed resident agents, declared it unlawful to pay
any emolument to a nonresident for obtaining policies covering
risks therein, and authorized the exclusion of any company which
failed to observe this inhibition.
Page 270 U. S. 437
The bill alleges that, although the complainant had been duly
licensed to transact business in New Mexico for many years,
defendants were threatening to suspend the license therefor because
of supposed violations of § 2820. It asks a decree declaring that
section unconstitutional insofar as payments to nonresidents for
procuring insurance were prohibited, and that defendants be
restrained from attempting to revoke or refusing to renew the
The act effective March 20, 1925, codified the insurance laws of
the state; expressly repealed former statutes regulating the
business, transferred the powers of the Bank Examiner to the
Corporation Commission, and charged the Superintendent of the
Department of Insurance with general administration of the law. It
sets up an entirely new system of control, and contains no
provision concerning payments to outside agents like the one
challenged by complainant. It provides:
"Upon the application of any insurance company for a license to
transact an insurance business in the State of New Mexico, the
superintendent shall immediately satisfy himself that the said
company . . . has . . . complied with all the . . . requirements of
this Act, and shall thereupon be obligated to issue a license to
the said company authorizing it to transact the forms of insurance
permitted under its articles of incorporation and authorized under
this Act for any one insurance company to transact."
The bill questions the validity of a statute which was repealed
in 1925. There is no effective remedy which this or any other court
can now grant under its allegations and prayers. The cause has
become moot, and should be treated accordingly.
MR. JUSTICE BRANDEIS and MR. JUSTICE SANFORD concur in this