Glendale Federal Sav. and Loan Ass'n v. State, Dept. of Ins.

• Decision Date: 30 September 1991
• Docket Number: No. 88-2266,88-2266
• Citation: 587 So.2d 534
• Parties: GLENDALE FEDERAL SAVINGS AND LOAN ASSOCIATION; Community Federal Savings and Loan Association of the Palm Beaches; Naples Federal Savings and Loan Association; Wilshire Glen Services, Inc., d/b/a Jewel City Insurance Agency, a California Corporation registered to do business in the State of Florida; Comfed, Inc., d/b/a Community Insurance Agency, a Florida corporation, and John O'Conner, Appellants, v. STATE of Florida, DEPARTMENT OF INSURANCE, a state agency, and the Honorable Bill Gunter, as Insurance Commissioner and Treasurer of the State of Florida, et al., Appellees. 587 So.2d 534, 16 Fla. L. Week. D2549
• Court: Florida District Court of Appeals

Page 534

587 So.2d 534

GLENDALE FEDERAL SAVINGS AND LOAN ASSOCIATION; Community Federal Savings and Loan Association of the Palm Beaches Naples Federal Savings and Loan Association; Wilshire Glen Services, Inc., d/b/a Jewel City Insurance Agency, a California Corporation registered to do business in the State of Florida; Comfed, Inc., d/b/a Community Insurance Agency, a Florida corporation, and John O'Conner, Appellants, v. STATE of Florida, DEPARTMENT OF INSURANCE, a state agency and the Honorable Bill Gunter, as Insurance Commissioner and Treasurer of the State of Florida, et al., Appellees.

No. 88-2266.

587 So.2d 534, 16 Fla. L. Week. D2549

District Court of Appeal of Florida First District.

Sept. 30, 1991.

Rehearing Denied Nov. 4, 1991.

Marguerite H. Davis and Edward L. Kutter of Katz, Kutter, Haigler, Alderman, Eaton & Davis, P.A., and Keith C. Tischler and Jack M. Skelding, Jr., of Parker, Skelding, McVoy & Labasky, Tallahassee, for appellants.

Robert A. Butterworth, Atty. Gen., Eric J. Taylor, Asst. Atty. Gen., and Lisa S. Santucci, Asst. Gen. Counsel, Dept. of Ins., Tallahassee, for appellees Florida Dept. of Ins. and Ins. Com'r Bill Gunter.

DuBose Ausley, Kenneth R. Hart, and Steven P. Seymoe of Ausley, McMullen, McGehee, Carothers & Proctor, Tallahassee, for appellee Florida Ass'n of Ins. Agents.

J. Robert McClure, Jr., of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tallahassee, for amicus curiae Florida Ass'n of Life Underwriters.

John J. Gill, General Counsel, Michael F. Crotty, Associate General Counsel, and Irving D. Warden, Asst. Counsel, Washington, D.C., for amicus curiae American Bankers Ass'n.

J. Thomas Cardwell and Virginia B. Townes of Akerman, Senterfitt & Eidson, Orlando, for amicus curiae Florida Bankers Ass'n.

PER CURIAM.

This is an appeal of an August 11, 1988 final summary judgment, granting defendants/appellees' motion addressed to appellants' complaint for declaratory relief and denying appellants' motion for such relief. Appellants contend here (1) that the restrictions on insurance agents contained in Sec. 626.988, F.S. (1983), are so vague and ambiguous as to render the statute incapable of proper construction; that it is unconstitutionally violative of equal protection and due process, and constitutes an unlawful delegation of legislative authority to the state Department of Insurance; and that the matter regulated is preempted by federal law. We affirm, finding appellants have not carried their burden of demonstrating from the record here the existence of material disputed facts precluding the trial court's disposition. ¹

Because the vagueness challenge deals with economic regulation, we are constrained to use greater latitude in applying a vagueness test because the affected parties are comparatively sophisticated and are clearly intended to seek administrative guidance. Village of Hoffman Estate v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982). See also Department of Legal Affairs v. Rogers, 329 So.2d 257, 264 (Fla.1976). Most of the language questioned can be interpreted according to common understanding and reason, and several terms, such as "financial institution," "insurance agency activities," and "financial institution agency," are expressly defined in the statute. The court correctly found that the statute affords fair notice to the parties that they are affected and what is prohibited, and also affords sufficient guidance to the agency charged with enforcing it.

As to appellant's equal protection and due process arguments, this court previously reversed and remanded an order of dismissal for the expressed purpose of giving appellants a chance to build a record as to alleged discrimination without rational basis in the terms of the act, and "[m]ore importantly ... to show [as alleged] that so many financial institutions and their agents are currently being permitted to sell insurance under the grandfather exceptions ... that the entire statute has been rendered ineffectual." Glendale Federal Savings & Loan Association v. State of Florida, Department of Insurance, 485 So.2d 1321, 1325 (Fla. 1st DCA 1986). From our reading of the briefs and those portions of the record which are undisputed in any significant respect, we conclude that appellants made no showing sufficient to require the trial court's exercise of any functions beyond the proper scope of the motions for summary judgment, and that the order entered is facially and substantively adequate.

The challenged classifications are (1) financial institutions located in towns with a population of less than 5,000; (2) certain financial institutions exempted from the statute; (3) financial institutions "grandfathered" at the time the statute was enacted; and (4) an exemption allowing financial institutions to sell credit insurance. The population exemption may be related to lack of availability of insurance in smaller towns, the traditional overlapping of functions in their businesses, and the need for additional sources of income for survival of banks in that market. Certain financial institutions are exempt on the apparent theory that they cannot effectively exercise influence or control over a bank or savings and loan association. This exemption prevents the statute's application to institutions that are less likely to indulge in the "evils" of coercion, unfair trade practices, and undue concentration of resources.

The "grandfather" exemption protects vested rights, and cannot here be said to be so lacking in rationality that it constitutes an impermissible denial of equal protection. See City of New Orleans v. Dukes, 427 U.S. 297, 305, 96 S.Ct. 2513, 2517-18, 49 L.Ed.2d 511 (1976). Finally, the exemption that allows financial institutions to sell credit insurance is rationally related to the legitimate goal of protecting the proper business interests of those institutions and their loans. Because each classification appears to bear some reasonable relationship to a legitimate state purpose, we conclude that the trial court correctly found no violation of equal protection. And the cited rational bases of prevention of coercion, unfair trade practices, and undue concentration of resources, in light of evidence in the form of affidavits and deposition testimony of expert witnesses, support the conclusions that the legislature could properly decide to act as it did, and that the statute accordingly does not violate due process.

Appellants contend that 12 U.S.C. Sec. 1461, et seq., which governs the manner in which a federal savings and loan association may do business, has preempted Sec. 626.988 as it pertains to savings and loan associations. The Third Circuit recently dismissed this same argument in Ford Motor Co. v. Insurance Commissioner of the Commonwealth of Pennsylvania, 874 F.2d 926 (3d Cir.1989), cert. denied, sub nom. USAA v. Foster, 493 U.S. 969, 110 S.Ct. 418, 107 L.Ed.2d 382 (1989), in determining that Pennsylvania's statute, which precludes companies that sell insurance in Pennsylvania from affiliation with savings and loan institutions, was not preempted by federal legislation. That court stated, and we agree:

We are unpersuaded, however, as were the district courts, that Congress intended to preempt entirely the states' authority to impose regulations upon savings and loan institutions that operate within the state's borders, or, as in the present case, to impose regulations upon other financial institutions that seek affiliations with savings and loans.

Affirmed.

ERVIN, J., and WENTWORTH, Senior Judge, concur.

ZEHMER, J., concurs in part and dissents in part with opinion.

ZEHMER, Judge (dissenting).

I concur in affirming the summary judgment for appellees on the issue of the statute's unconstitutional vagueness and the issue of federal preemption. For the following reasons, however, I respectfully dissent from the affirmance of the issues of equal protection and due process, and I would reverse and remand for an evidentiary trial on those issues.

Appellants contend that section 626.988 violates the equal protection clauses of the federal and state constitutions because there is no rational relationship between the statute's stated purpose and the classifications, or class delineations, created in that section. Appellants characterize the statutory purpose as "preventing the dangers of permitting the designated financial institutions to provide both financial services and insurance," and argue, "The obvious facial flaw of section 626.988 is that there are no practical differences between the members of the class and those exempted from the regulated class." I shall first set forth a summary of the arguments of appellants and appellees on the four challenged classifications described in the majority opinion, and then discuss why this issue should not have been disposed of on summary judgment.

First, appellants contend that providing an exception for banks in a city having a population not in excess of 5,000 is purely arbitrary and unrelated to the statutory purpose. They argue that the size of a municipality in which the bank is located has no effect upon the ability of an employee of the bank to engage in unfair practices and that "a bank serving a smaller population would be in a less competitive market, and would therefore have greater ability to engage in coercive conduct." In reply, appellees point out that the scope of this exemption is the same as that passed by Congress in its 1916 amendment to the 1864 National Banking Act, codified as 12 U.S.C. Sec. 92. This exemption specifically authorizes such banks to "act as agent for any fire, life or other insurance company authorized by the authorities of the State in which such bank is located to do business in said state, by soliciting and selling insurance and collecting premiums on policies issued by such company." The exemption is said to be based on such banks' need for...