STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERICAN SAVINGS AND LOAN )

ASSOCIATION OF FLORIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 82-3333

) AMERIFIRST FEDERAL SAVINGS AND ) LOAN ASSOCIATION and STATE OF ) FLORIDA, DEPARTMENT OF BANKING ) AND FINANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, R. L. Caleen, Jr. , a Hearing Officer with the Division of Administrative Hearings, conducted a formal hearing in this case from March 21 to 25, 1983, in Miami, Florida.

APPEARANCES

For Petitioner: Robert D. Shevin, Esquire

3050 AmeriFirst Building One Southeast Third Avenue Miami, Florida 33131

and

Bruce D. Fischman, Esquire 1108 Kane Concourse

Bay Harbor Islands, Florida 33154

For Respondent: J. Frost Walker, III, Esquire

and Davis S. Wood, Esquire 2400 AmeriFirst Building One Southeast Third Avenue Miami, Florida 33131

Michael Basile, Esquire

General Counsel, Office of the Comptroller Department of Banking and Finance

The Capitol, Plaza Level Tallahassee: Florida 32301

ISSUE

Whether the proposed name "AmeriFirst Financial S.A.," is so similar to an existing name, "American Savings and Loan Association of Florida," as to cause confusion.

FINDINGS OF FACT

1. The Dispute

   
   

   1. On August 26, 1982, AmeriFirst Federal Savings and Loan Association ("AMERIFIRST") applied to the Department of Banking and Finance ("Department") for approval to convert from a federal to a state-chartered savings and loan association. In connection with this conversion, it proposed to use the name, "AmeriFirst Savings Association." On October 1, 1982, American Savings and Loan Association ("AMERICAN" or "AMERICAN SAVINGS"), an existing financial institution serving the same general area, objected to AMERIFIRST's proposed name and requested a hearing, claiming that the proposed name would be confused with its own. AMERIFIRST responded by amending its application to propose another name, "AmeriFirst Financial, S.A." On November 23, 1982, AMERICAN objected to this name and requested a hearing, contending that the proposed name would be so similar to its own name as to cause confusion. The Department thereafter forwarded this case to the Division of Administrative Hearings for assignment of a hearing officer to conduct a hearing and submit findings of fact.

      
      

   2. The case was initially set to be heard on February 7, 1983, then reset for March 21-25, 1983 to allow publication of notice in accordance with the Department's rules. The hearing lasted five days. Forty-eight witnesses testified and 144 exhibits were received into evidence.

      
      

   3. The transcript of hearing was filed on May 13, 1983. The parties filed proposed findings of fact and memoranda of law by May 30, 1983.

      
      

2. The Parties

   
   

   1. The Department is the state agency which approves or denies applications to convert from a federal to a state chartered savings and loan association (without change of business form). Its own rule, Section 3C-23.05, Florida Administrative Code, prohibits it from approving an application until it is satisfied that "the resulting name upon conversion is not so similar as to cause confusion with the name of any other existing financial institution."

      
      

   2. AMERICAN, chartered and opened in 1950, is one of the largest savings and loan associations in Florida.

      
      

   3. AMERIFIRST is the largest savings and loan association in Florida and the first federally chartered savings and loan association in the nation. Until 1979, when it changed its name to "AmeriFirst Federal Savings and Loan Association," AMFRIFIRST was known as "First Federal Savings and Loan Association of Miami." Although AMERICAN was aware of AMERIFIRST's 1979 name change, it did not object at the time on the ground that the new name would be confused with its own.

      
      

   4. AMERICAN and AMERIFIRST are competing savings and loan associations. Both are headquartered in Miami and provide similar financial services to customers in Dade, Broward, and Palm Beach Counties. During the last several years, both have pursued aggressive branch banking policies, frequently placing their offices in close proximity to one another.

      
      

   5. In recent years, both have expanded their operations and increased their financial strength. Since 1978, however, AMERICAN has increased its

      market share. It has increased its deposits by a greater percentage and opened more branch offices in the three counties than has AMERIFIRST.

      
      

3. Similarities

   
   

   1. AMERICAN contends that the proposed name, "AmeriFirst Financial, S.A.," will, be truncated to "AMERIFIRST" which is so similar to "AMERICAN" as to cause confusion between the two names. In attempting to prove such confusion is likely, AMERICAN alleges, and has satisfactorily established, that the two financial institutions do, indeed, have many similarities. They serve similar customers, operate similar facilities, provide similar financial services to people in the same service area, and use similar advertising media--newspaper, radio, and television.

      
      

   2. AMERICAN also alleges, and has attempted to show, that AMERIFIRST-- when it adopted its new name in 1979--set out to capitalize on AMERICAN's name and reputation by choosing a similar name; and that, in the ensuing years, the similarity of the two names have, in fact, caused a great deal of actual confusion among customers and businesses serving the savings and loan industry. The first question, then, is whether, in 1979, AMERIFIRST (then First Federal Savings and Loan Association of Miami) intentionally selected a name to capitalize on the name and reputation of AMERICAN.

      
      

4. Intent

   
   

   1. In 1978, AmeriFirst (then First Federal Savings and Loan Association of Miami) hired a consultant to help it choose a new and distinctive name. The consultant conducted several focus group interview sessions to test consumer reaction to various names, including "AmeriFirst Federal Savings and Loan Association," and submitted a report and recommendation. The report described the comments of various focus group members. At least one member indicated that the proposed name, "AmeriFirst Federal Savings and Loan Association," sounded like a merger between First Federal (predecessor to AmeriFirst) and AMERICAN SAVINGS. Absent such a merger, the report stated "it seemed to some to be a rip-off of two established names." (P-5) AMERIFIRST (then First Federal) gave little weight to this isolated criticism and, instead, relied on more prevalent positive reaction to the proposed name, "AmeriFirst Federal Savings and Loan Association." The consultant's report, generally, showed a positive reaction to the name, "AmeriFirst." The consultant recommended that the name be adopted, and it was. AMERICAN urges that AMERIFIRST's adoption of the new name, despite the adverse comment from at least one focus group member, shows that AMERIFIRST' intentionally adopted a name to capitalize on AMERICAN's name and reputation. This contention is rejected as unsupported by the evidence. Although there was one negative comment there were many positive responses to the name, "AmeriFirst Federal Savings and Loan Association." All that has been shown is that AMERIFIRST gave more weight to the positive responses, which were prevalent.

      
      

   2. The evidence convincingly establishes that, in 1978, AMERIFIRST (then First Federal) was committed to adopting a new, unique, and distinctive name-- one which would allow it to create a new market identity. To adopt a name emulating a name of one of its competitors would defeat its purpose. Further, AMERIFIRST was, by far, the larger of the two institutions and advertised most extensively. It is implausible that it would have embarked on a massive advertising campaign to market its new name and identity if the advertising would benefit AMERICAN, its smaller competitor.

   3. At that time, AMERIFIRST (then First Federal) owned and operated a financial institution in Orlando, Florida, named "American Federal Savings and Loan Association." Yet, AMERIFIRST chose to change the name of that institution to "AmeriFirst Federal Savings and Loan Association" rather than continue to operate under the name American Federal Savings and Loan Association," a name which it, no doubt, could have continued to use.

      
      

   4. The two names, "American Savings and Loan Association" and "AmeriFirst Federal Savings and Loan Association" are sufficiently different to negate the allegation that AMERIFIRST intended to adopt a name similar to AMERICAN's. AMERIFIRST is a unique, coined word; AMERICAN is a geographic, descriptive, generic--and more common word. The differences in spelling and pronunciation are obvious. The dissimilarity between the two names is further demonstrated by the fact that AMERICAN--although it was aware of the name First Federal proposed to use--did not object to it.

      
      

5. Name Confusion

   
   

   1. AMERIFIRST's proposed name, "AmeriFirst Financial, S.A.," contains no words in common with the name of the protestant, "American Savings and Loan Association of Florida."

      
      

   2. Further, the proposed name is obviously more dissimilar from "American Savings and Loan Association of Florida" than AMERIFIRST's current name, "AmeriFirst Federal Savings and Loan Association," a name which AMERICAN has not opposed.

      
      

   3. Financial institutions tend to adopt names which denote solidarity and strength and instill confidence. Because of the limited number of such words, names of individual financial institutions are frequently similar: Sun Bank-- Sun Federal; Biscayne Bank--Biscayne Savings and Loan Association; Intercontinental Bank--Intercontinental Savings and Loan Association; and First National Bank--First Federal Savings and Loan Association. When viewed in this context, the names "AmeriFirst Financial S.A." and "American Savings and Loan Association of Florida" are more dissimilar than the names of many other financial institutions in Florida.

      
      

   4. Because of such name similarities, customers are accustomed to differentiating between the names of financial institutions. They are more discerning and take greater care in selecting financial institutions than they exercise in purchasing other goods or services.

      
      

   5. Persons employed in the banking industry and customers of AMERIFIRST routinely refer to the institution as "AmeriFirst." Since it changed its name in 1979, AMERIFIRST has emphasized the word, "AmeriFirst," in its advertising, on its headquarters building sign, and in printed materials. Its branch office signs read, "AmeriFirst," or "AmeriFirst Federal."

      
      

   6. If the pending application to convert using the name "AmeriFirst Financial S.A." is approved, AMERIFIRST will, most likely, not change the large "AmeriFirst" sign on its headquarters building. Neither would it change the signs on its various branches to "AmeriFirst Financial S.A."; it is likely that it would continue to be referred to as "AmeriFirst."

      
      

   7. Similarly, American, Savings and Loan Association of Florida is commonly referred to by customers as "American Savings." This truncated form of

      "American Savings and Loan Association of Florida" is the name which AMERICAN emphasizes in its advertising.

      
      

   8. Since, even if its name is changed, AmeriFirst Federal Savings and Loan Association will continue to be known as "AmeriFirst," it is reasonable (when determining likelihood of future name confusion) to examine whether, and to what extent, the names AmeriFirst" and "American Savings" have been confused in the past.

      
      

   9. Prior to hearing, AMERICAN recorded instances where customers or businesses servicing the banking industry apparently confused AMERICAN with AMERIFIRST. The instances of apparent confusion are numerous and include misdirected wire transfers', mail, and telephone calls. Moreover, many customers entered AMERICAN SAVINGS' offices under the mistaken belief that they were AMERIFIRST offices. The number of instances of apparent confusion between the two institutions is, however, insubstantial when considered in light of the large number of total transactions.

      
      

6. Misdirected Wire Transfers

   
   

   1. Between 1981 and March, 1983, there were approximately 20 misdirected wires involving AMERICAN and AMERIFIRST, totalling $73,042,600.00. Included is the largest erroneous wire transfer ever received by AMERIFIRST, in the amount of $30,008,652.78. The funds were intended for AMERICAN but, instead, were wired to AMERIFIRST. Because of this error, AMERICAN's federal reserve account was temporarily overdrawn, subjecting it to potential penalties. Because of the misdirected wire, customers were sometimes without the funds for a month or more.

      
      

   2. Wire transfer operators utilize routing numbers, but the routing numbers are derived from a list of the names of financial institutions.,

      
      

   3. AMERICAN has not suffered monetary damage from these misdirected wire transfers. Indeed, unlike AMERIFIRST--which returns monies to the sender when it is unable to locate the rightful owner--AMERICAN places misdirected wire funds in a special account, where they may remain for a considerable time. This account has a substantial average daily balance on which AMERICAN accrues interest.

      
      

   4. The evidence does not establish that the misdirected wire transfers were caused by inability to distinguish between AMERICAN and AMERIFIRST. The mistakes may also have resulted from operator carelessness, inadvertence, or inattention.

      
      

   5. These 20 misdirected wire transfers are insubstantial and insignificant when measured by the total number of wire transfers handled by AMERICAN and AMERIFIRST. AMERICAN handled approximately 13,000 wire transfers between January 1982, and January, 1983. AMERIFIRST handles approximately 15,000 wire transfers per year. (The amount of money involved in a misdirected wire has little significance since the amount involved does not ordinarily affect the degree of care exercised by a wire operator.)

      
      

7. Misdirected Mail

   
   

   1. Similarly, there have been numerous instances where U.S. mail addressed to AMERIFIRST was delivered, instead, to AMERICAN. But AMERICAN has not proven that the amount of misdirected mail is--in context--substantial or

      statistically significant. Neither has it shown that attentive customers or postal employees were confused to the extent they were bewildered or unable to discern the difference between the names of the two institutions. AMERIFIRST handles approximately 1,800 pieces of mail per day, AMERICAN handles somewhat less. This calculates to 54,000 pieces of mail in a six-week period. When measured against such a large volume, the amount of misdirected mail is considered insubstantial and insignificant.

      
      

   2. Misdirected mail between the two institutions is, simply, not a bona fide problem. This is best illustrated by the amount and type of misdirected mail received by AMERIFIRST. Between December, 1982 and February, 1953, AMERIFIRST received three pieces of mail which were intended for AMERICAN but delivered, instead, to AMERIFIRST. But during the same period, AMERIFIRST received a greater amount of mail which was intended for Dade Savings and Loan Association, but mistakenly delivered to AMERIFIRST.

      
      

8. Customer Confusion

1. AMERICAN, through the testimony of 23 branch managers, account managers, and office personnel demonstrated more than 3,000 separate incidents of apparent customer confusion between AMERICAN and AMERIFIRST. Included were instances where AMERIFIRST customers came into AMERICAN branches to withdraw money from their AMERIFIRST passbook accounts or to cash AMERIFIRST checks; where people came into AMERICAN branch offices looking for an AMERIFIRST gift or pursuant to an AMERIFIRST promotion; where persons mistakenly telephoned AMERICAN when they intended, to call AMERIFIRST; and where AMERICAN employees were referred to, in print or at public functions and speaking engagements, as AMERIFIRST employees.

   
   

2. Two customers, Frank A. Maietta and Bernadette Rogers--customers of both AMERICAN and AMERIFIRST--were presented to show instances of actual customer name confusion. Mr. Maietta had gone to an AMERIFIRST office to open an account; the waiting line was too long so he left and proceeded to what he thought was another AMERIFIRST branch. Instead, he learned--after speaking to an employee--that he was in an AMERICAN SAVINGS' branch office. (Nonetheless, he opened an account at AMERICAN.) Ms. Rogers was Mr. Maietta's companion and accompanied him to the branch offices. The significance of their mistake is lessened by the fact that it did not really matter to them which institution they were in; to them it gas immaterial. Both witnesses, however, were able to distinguish between the names of the institutions and recognized that they were different entities.

   
   

3. Syd Katz, another AMERICAN SAVINGS' customer, had been driving down a busy street in West Palm Beach and, having sighted a new building under construction, remarked to his grandson, "that's grandpa's bank over there. They have opened a new branch here." (TR-742) Mr. Katz later learned that he had been mistaken, that the sign he had read had indicated, instead, an AMERIFIRST branch office. At hearing, Mr. Katz, too, was clearly able to discern the difference between the two names. His earlier mistaken identification while driving on a busy road has not been shown to be other than the result of inattentiveness and distraction.

   
   

4. The fourth "customer" who testified was Betty Tach, a real estate broker who was not a customer of AMERICAN SAVINGS. She had gone to AMERICAN to make a cash deposit for her sister, who was a customer and out of the country. Ms. Tach, without looking at her sister's deposit slip, proceeded to an AMERICAN SAVINGS' branch office rather than to the AMERIFIRST office where her sister had

   an account. This incident shows only that Ms. Tach was careless in not first checking her sister's deposit slip. It does not demonstrate that she was confused by the names of the two institutions or that she could not discern the difference.

   
   

   1. Survey of Consumer Confusion

      
      

5. AMERICAN hired Guideline Research Corporation to conduct a study to determine whether people living in the three-county area confused the names of the two institutions and, if so, to what extent. A sampling plan was developed, consumers were questioned, tested, and categorized. The confusion study concluded that between 343,200 and 517,600 members of the relevant populations in the three-county area were confused by the names AMERICAN SAVINGS and AMERIFIRST. This calculated to a range of 18.3 percent to 42.7 percent of the relevant population. (P-101)

   
   

6. These conclusions lack credibility because the study is flawed for several reasons. First, the study did not test consumers on whether they would be confused between "American Savings and Loan Association of Florida" and "AmeriFirst Financial S.A.," the names at issue. Doctor Jacob Jacoby, PhD., who designed the study and test questions, was apparently unaware--until the date of hearing--that the names at issue were "American Savings and Loan Association of Florida" and "AmeriFirst Financial S.A." When asked about the relevance of his study to "AmeriFirst Financial S.A.," he replied:

   
   

   I believe it [use of the name, "AmeriFirst Financial S.A."] would lead to at least as much, probably somewhat more confusion [than use of the name "AmeriFirst Federal"]. (TR--1216)

   
   

   The conclusion that use of the name "AmeriFirst Financial S.A." would cause "probably somewhat more confusion" than use of the name "AmeriFirst Federal" is inexplicable and rejected. His credibility is further strained by his statement that the letter "A" in "AmeriFirst Financial S.A." would be confused with the word "Association" in the name, "American Savings and Loan Association of Florida." Second, the study did not even accurately measure the extent of name confusion between "AmeriFirst" and "American Savings." The study was, essentially, a modified advertising recall survey. Consumers were shown actual newspaper advertisements of products, then asked to recall what they saw. Their recall ability or accuracy could have been affected by uncontrolled variables such as the impression made by a particular advertisement, or the effectiveness of advertising campaigns conducted by the companies involved. And third, the test questions were designed to exaggerate a number of "confused" persons. For example, a person who accurately recalled the advertising copy was then subjected to another battery of tests. Even if this second series of tests was passed, the person was nonetheless labeled "confused" if he or she was not absolutely sure of the advertisement identification. These deficiencies impeach the study's neutrality, detract from its credibility and render its conclusions suspect.

   
   

   1. Motives of American Savings

      
      

7. AMERICAN's claim that there has been substantial and serious confusion between the names `American" and "AmeriFirst" is undercut by its prior conduct. When AMERIFIRST (then First Federal) adopted its new name in 1979, AMERICAN--

   although aware of the name change--did not object. From 1979 until August, 1982,--when AMERIFIRST applied to convert to a state-chartered savings and loan-

   -AMERICAN never complained to AMERIFIRST about alleged name confusion between the two institutions; in their conversations the subject was never mentioned.

   
   

8. Even now, AMERICAN does not object to AMERIFIRST retaining its name, as long as it remains a federally-chartered savings and loan association. But the record convincingly establishes that the act of converting from a federal to a state-chartered savings and loan would not affect the level of alleged name confusion. The timing of AMERICAN's name protest and its utter failure to raise the problem earlier, support an inference that AMEMCAN's objection to AMERIFIRST's proposed name change is motivated--at least in part--by opposition to AMERIFIRST's conversion to a state charter. (A state charter will allow AMERIFIRST to expand its operations in the more lucrative area of commercial financing.)

   
   

   1. Ultimate Finding

      
      

9. For the above reasons, the proposed name, "AmeriFirst Financial S.A." is not so similar as to cause confusion with "American Savings and Loan Association," the name of an existing financial institution.

   
   

   1. Disposition of Proposed Findings of Fact

   
   

10. Both AMERICAN and AMERIFIRST submitted post-hearing proposed findings of fact. To the extent AMERICAN's proposed findings are incorporated herein they are adopted; moreover, proposed findings 4-13, 15, 30, 32, 37, 40, 41, 57, 58, and 60 are expressly adopted as though fully set out herein. The remaining proposed findings submitted by AMERICAN are rejected as unsupported by the weight of the evidence, unnecessary to resolution of the issue posed, or mere recitation of testimony presented at hearing.

    
    

11. Similarly, AMERIFIRST's proposed findings are adopted to the extent they are incorporated herein; otherwise they are rejected as unsupported by the weight of the evidence or unnecessary to resolution of the issue.

DONE and Entered this 16th day of June, 1983, in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 16th day of June, 1983.

ENDNOTE

1/ American's exhibits will be referred to as "P-"; AmeriFirst's exhibits as "R-." Pages in the transcript of hearing will be referred to as "TR-."

COPIES FURNISHED:

Robert D. Shevin, Esquire 3050 AmeriFirst Building One Southeast Third Avenue Miami, Florida 33131

Bruce D. Fischman, Esquire 1108 Kane Concourse

Bay Harbor Islands, Florida 33154

J. Frost Walker, III, Esquire and David S. Wood, Esquire 2400 AmeriFirst Building

One Southeast Third Avenue Miami, Florida 33131

Michael Basile, Esquire General Counsel, Office of the Comptroller

Department of Banking and Finance

The Capitol, Plaza Level Tallahassee, Florida 32301

Gerald Lewis Comptroller State of Florida

Department of Banking and Finance Tallahassee, Florida 32301

Docket for Case No: 82-003333

Orders for Case No: 82-003333