Barnett Banks of Marion County, NA v. Gallagher

• Decision Date: 03 December 1993
• Docket Number: No. 93-178-Civ-Oc-20.,93-178-Civ-Oc-20.
• Citation: 839 F. Supp. 835
• Parties: BARNETT BANKS OF MARION COUNTY, N.A., a national banking association, Plaintiff, v. The Honorable Tom GALLAGHER, Insurance Commissioner of the State of Florida; The Florida Department of Insurance, a state agency; Florida Association of Life Underwriters; Professional Insurance Agents of Florida, Inc.; and Florida Association of Insurance Agents, Defendants.
• Court: U.S. District Court — Middle District of Florida

839 F. Supp. 835

BARNETT BANKS OF MARION COUNTY, N.A., a national banking association, Plaintiff, v. The Honorable Tom GALLAGHER, Insurance Commissioner of the State of Florida; The Florida Department of Insurance, a state agency; Florida Association of Life Underwriters; Professional Insurance Agents of Florida, Inc.; and Florida Association of Insurance Agents, Defendants.

No. 93-178-Civ-Oc-20.

United States District Court, M.D. Florida, Ocala Division.

December 3, 1993.

David M. Wells, Mahoney, Adams & Criser, Jacksonville, FL, for plaintiff.

Robert Prentiss, Office of Legal Affairs, David J. Busch, Law Office of David J. Busch, Tallahassee, FL, for Tom Gallagher.

Don Dowdell, Daniel Y. Sumner, Robert Prentiss, Office of Legal Affairs, David J. Busch, Law Office of David J. Busch, Tallahassee, FL, for Florida Dept. of Ins.

J. Robert McClure, Jr. Carlton, Fields, Ward, Emmanuel, Smith & Cutler, PA, Tampa, FL, Ann M. Kappler, Arti K. Rai, Jenner & Block, Washington, DC, for Florida Ass'n of Life Underwriters, Professional Ins. Agents of Florida, Inc., and Florida Ass'n of Ins. Agents.

OPINION and ORDER

SCHLESINGER, District Judge.

This cause came before the Court on November 19, 1993 on Plaintiff's Motion for a Preliminary Injunction (Doc. No. 4, filed October 25, 1993) and Plaintiff's Renewed Motion filed on November 4, 1993 (Doc. No. 24), consolidated, pursuant to Rule 65(a)(2), Fed. R.Civ.P., with a trial on the merits of the requested declaratory relief.

INTRODUCTION

Plaintiff filed this action for permanent injunctive and declaratory relief on October 18, 1993 asking the Court "to construe the National Bank Act, 12 U.S.C. § 21, et seq., and its preemptive effect on State regulation of federally chartered banking associations." Complaint at ¶ 1. While Fla.Stat. ch. 626.988 precludes bank subsidiaries from engaging in insurance activities in the state of Florida, 12 U.S.C. § 92 ("section 92") allows national banks — presumably without regard to their status as subsidiaries or affiliates — to act as insurance agents in localities where the population is less than 5,000. Accordingly, Plaintiff asserts, the Court should declare, inter alia, that the state statute is preempted by the federal one, and that Plaintiff is allowed to act as an insurance agent for any Florida-authorized insurance company.

On October 22, 1993, Defendant Gallagher issued an Immediate Final Order to Cease and Desist to Linda K. Clifford and Linda Clifford Insurance, Inc. ("LCI"), an insurance agency purchased by Plaintiff on October 18, 1993. Defendant Gallagher ordered Clifford and LCI, in light of their current association with Plaintiff, to cease and desist from any and all insurance agency activity other than credit life insurance and credit disability insurance.

On October 25, 1993, Plaintiff filed a Motion seeking immediate injunctive relief in the form of either a Temporary Restraining Order ("TRO") or a Preliminary Injunction. The Court found that Plaintiff failed to demonstrate that the alleged injury was "so imminent that notice and a hearing on the application for preliminary injunction is impractical if not impossible." Local Rule 4.05(b)(2). Accordingly, that portion of the Motion seeking a TRO was denied.

The Court heard argument on the Motion for a Preliminary Injunction on October 27, 1993, left intact its prior ruling on the TRO, and set the matter for a consolidated trial and hearing on the Motion for Preliminary Injunction.

Defendants have counterclaimed against Plaintiff, asking the Court for the opposite declaratory relief, namely, that section 92 prohibits Plaintiff from, inter alia, soliciting insurance or acting as an agent for others soliciting insurance in such localities.

Having presided over the trial in this matter, and having considered the entire record, the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Plaintiff, a subsidiary of the bank holding company Barnett Banks, Inc., is a national banking association organized and existing under the National Bank Act, 12 U.S.C. § 21, et seq. Plaintiff maintains its principal place of business in Ocala, Florida, and engages in the business of banking there and elsewhere within Marion County, Florida. Plaintiff owns and operates a branch bank located in Belleview, Florida, the population of which, according to the last decennial census, is less than 5,000.

Prior to October 18, 1993, LCI operated from Belleview as a general lines agent for insurance companies authorized to do business in Florida. On that date, Plaintiff purchased certain of LCI's assets, including its name, and LCI's employees became employees of Plaintiff. The decision to purchase the assets of LCI was made by Plaintiff, based upon the recommendation of the Executive Committee of Barnett Banks, Inc., which is the largest bank holding company headquartered in Florida and one of the largest in the southeastern United States.

Plaintiff has stated that all insurance sales made through the insurance division of Barnett Belleview are made from the office in Belleview through Linda Clifford or licensed agents acting under her supervision. Linda Clifford is licensed in the state of Florida as life, health and general lines insurance agent, and is subject to the jurisdiction and regulation of Defendant Florida Department of Insurance ("DOI") pursuant to Chapters 624 and 626, Florida Statutes. Linda Clifford has insurance customers both inside and outside of incorporated Belleview. The Belleview branch of Plaintiff has banking customers inside and outside of incorporated Belleview.

With respect to all insurance sales conducted by the insurance division of its Belleview branch, Plaintiff's stated intent is that such insurance will be marketed to existing and potential customers regardless of where they are located, subject only to the requirements that (1) such sales be conducted only on behalf of insurance companies licensed to business in Florida and (2) such insurance not be sold from bank branches in towns whose population is in excess of 5,000.

On its face, section 626.988 purports to prevent the insurance agency activities of the Plaintiff's Belleview branch.

Section 92

As enacted in 1916, section 92 of the Federal Reserve Act¹ provides that

any national banking association located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by the Comptroller of the Currency, act as agent for any ... insurance company authorized by the authorities of the State in which said bank is located to do business in said State ...

12 U.S.C. § 92. In 1963 the Comptroller issued a ruling that this section allows a branch of a national bank located in a community the population of which is 5,000 or less to sell insurance, even though the principal office of that bank may be in a community whose population exceeds 5,000. This policy presently is codified at 12 C.F.R. § 7.7100 (1993). The fact that 12 U.S.C. § 92 presently does not appear in the United States Code, and has not for some time, led at least two circuits to opposite conclusions regarding whether or not the section actually continued to exist. However, the Supreme Court recently resolved this inter-circuit conflict, stating that a 1918 amendment neither repealed nor affected section 92, which section remains current law. See Nat. Bank of Or., ___ U.S. at ___ - ___, 113 S.Ct. at 2182-86.

Accordingly, there is no question that section 92 remains the law of the land. Moreover, this section places no limitations on the geographic scope of insurance sales authorized thereunder. See Independent Ins. Agents v. Ludwig, 997 F.2d 958, 961 (D.C.Cir.1993). Thus, provided that the bank is selling the insurance from a community of fewer than 5,000 inhabitants, there are no limits as to where the insurance may be sold. However, Defendant Gallagher, while accepting that proposition, also appears to ask the Court to read into section 92 a further requirement that such banks' activities be confined to such localities. The Court finds no such restriction within the language of section 92. Thus, even if it is true that, as alleged by Defendant, only 35% of Plaintiff's business is located in Belleview, that fact would not deprive Plaintiff of standing to assert that its activities should be deemed permissible under that statute.²

Nevertheless, while Ludwig is highly instructive, it involved no state scheme alleged to contravene section 92, as does the case at bar. There was no patent federal-state conflict in Ludwig, and thus it did not present the preemption issues such as presently are before the Court.

Florida statute 626.988

Section 626.988 of the Florida statutes provides, in relevant part:

(2) No insurance agent or solicitor licensed by the Department of Insurance under the provisions of this chapter who is associated with, under contract with, retained by, owned or controlled by, to any degree, directly or indirectly, or employed by, a financial institution shall engage in insurance agency activities as an employee, officer, director, agent, or associate of a financial institution agency.

Fla.Stat. ch. 626.988(2). The statute defines a "financial institution" as, inter alia, any bank or bank holding company, or any subsidiary, affiliate, or foundation thereof. Id. at 626.988(1)(a). However, "specifically excluded" from this definition is a bank which is not a subsidiary or affiliate of a bank holding company and which is located in a city having a population of less than 5,000. Id. Thus, the legislature met federal section 92 halfway: banks in such communities are allowed under Florida law to sell insurance, but only if they are not subsidiaries or affiliates of a (larger) bank holding company.

As stated above, Plaintiff Barnett...