STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MICKIE LEONARD (AS TO JAMES )

McLAUGHLIN), )

)

Petitioner, )

)

vs. ) CASE NO. 96-3805

) DEPARTMENT OF BANKING AND FINANCE, )

)

Respondent, )

and )

)

SUNNILAND BANK, )

)

Intervenor. )

)

RECOMMENDED ORDER OF DISMISSAL

Procedural Background

By letter dated May 14, 1996, the Department of Banking and Finance (Department), through Linda Townsend, of its Bureau of Financial Institutions, notified Sunniland Bank (Sunniland) of the following:

The Department has completed the background investigation on Mr. James M. McLaughlin, director of your bank. Based on the information contained in the notice filed with this office, we issue this letter to convey our intent not to disapprove Mr. McLaughlin as a director of Sunniland Bank.

On July 12, 1996, Petitioner filed an amended petition "request[ing] a formal proceeding on the letter." In her amended petition, Petitioner argued that the Department was required to disapprove McLaughlin as a director inasmuch as McLaughlin "does

not satisfy the standards set forth in Fla. Stat. Ann. Section 655.0385(3) or Fla. Admin. Code Ann. r. 3C-100.0385(5), and no written finding of rehabiliation was made by the Department.” Petitioner further contended in her amended petition that she "clearly has standing to challenge the Department's decision not to disapprove McLaughlin" by virtue of her status as "a depositor and the single largest shareholder of Sunniland . . ., who controls 46 percent of the bank's outstanding common shares."

The Department referred Petitioner's amended petition to the Division of Administrative Hearings on August 14, 1996. On October 21, 1996, Sunniland filed a Petition for Leave to Intervene in the instant case. By order issued November 13, 1996, Sunniland was granted the intervenor status requested in its petition.

On January 31, 1997, Sunniland filed a motion requesting (as it had in its Petition for Leave to Intervene) that Petitioner's amended petition be dismissed. In its motion, Sunniland argued that the amended petition "failed to state a cause of action upon which relief may be granted" and that Petitioner does not "have standing to maintain this proceeding.” On February 3, 1997, the undersigned issued an order directing Petitioner and the Department to file written responses to Sunniland's motion to dismiss no later than February 17, 1997. Petitioner and the Department timely filed their written responses to the motion on February 17, 1997. Oral argument on Sunniland's motion was held

by telephone conference call on March 14, 1997. During the telephone conference call, the undersigned advised the parties that it was his intention, regardless of how he ruled on the motion, to relinquish jurisdiction to the Department to consider his ruling before conducting any further proceedings in this case. The undersigned further advised the parties of their right to file proposed recommended orders on the motion, provided that they did so on or before March 24, 1997. Petitioner and the Department filed their proposed recommended orders on March 24, 1997. Sunniland filed its proposed recommended order on March 26, 1997, along with a Motion to Permit Late Filing of Proposed Recommended Order. On March 28, 1997, the undersigned issued an order granting Sunniland’s Motion to Permit Late Filing of Proposed Recommended Order and giving all parties the opportunity to file supplemental proposed recommended orders by April 7, 1997. Sunniland filed a supplemental proposed recommended order on April 7, 1997. The undersigned has carefully considered all of the parties’ pre- and post-argument submittals, as well as the argument they presented during the March 14, 1997, telephone conference call, in determining the recommendation that he should make to the Department in this Recommended Order.

Section 655.0385, Florida Statutes

Section 655.0385, Florida Statutes, provides as follows:

1. Each state financial institution shall notify the [D]epartment [of Banking and Finance] of the proposed appointment of any individual to the board of directors or the employment of any individual as an executive officer or equivalent position at least 30 days before such appointment or employment becomes effective, if the state financial institution:

   1. Has been chartered for less than 2 years;

      
      

   2. Has undergone a change in control or conversion within the preceding 2 years;

      
      

   3. Is not in compliance with the minimum capital requirements applicable to such financial institution; or

      
      

   4. Is otherwise operating in an unsafe and unsound condition, as determined by the [D]epartment, on the basis of such financial institution’s most recent report of condition or report of examination.1

2. A state financial institution may not appoint any individual to the board of directors, or employ any individual as an executive officer or equivalent position, if the [D]epartment issues a notice of disapproval with respect to that person.

   
   

3. The [D]epartment shall issue a notice of disapproval if the competence, experience, character, or integrity of the individual to be appointed or employed indicates that it is not in the best interests of the depositors, the members,2 or the public to permit the individual to be employed by or associated with the state financial institution.

Rule 3C-100.0385, Florida Administrative Code

The Department has promulgated procedures and standards to carry out the provisions of Section 655.0385, Florida Statutes. These procedures and standards are set forth in Rule 3C-100.0385,

Florida Administrative Code, which provides as follows:

1. Section 655.0385, Florida Statutes, requires state financial institutions to notify the Department of the proposed appointment of any individual to the board of directors or the employment of any individual as an executive officer or equivalent position

   30 days before such appointment becomes effective, if the applying financial institution:

   1. Has been chartered for less than 2 years;

      
      

   2. Has undergone a change in control or conversion within the preceding 2 years;

      
      

   3. Is not in compliance with the minimum capital requirements applicable to such financial institution; or

      
      

   4. Is otherwise operating in an unsafe or unsound condition, as determined by the Department, on the basis of such financial institution's most recent report of condition or report of examination.

   
   

2. Notice

   
   

   1. A financial institution shall provide a substantially complete written notice to the Department at least 30 days prior to the effective date of the appointment of a director or the employment of an executive officer or equivalent position. Each notice shall include a completed Biographical Report Form DBF-C-10-B, revised 12/93. Form DBF-C- 10-B, effective date 12-14-93, which is incorporated by reference, may be obtained by request from the Department of Banking and Finance, Division of Banking, The Capitol, Tallahassee, Florida 32399-0350.

      
      

   2. A notice is not deemed substantially complete until the financial institution provides all the information requested in paragraph (2)(a), including complete explanations where material issues arise regarding the character, integrity, or business acumen and judgment of the proposed

      director or executive officer or equivalent position, and any additional information that the Department requests following a determination that the financial institution's original submission of the notice was not substantially complete.

      
      

   3. Each proposed director or executive officer, or equivalent position, shall make certain that the notice submitted on his or her behalf is accurate.

   
   

3. Processing

   
   

   1. The Department shall have 30 days after receipt of a substantially complete notice to issue a letter of disapproval. Such disapproval letter shall be mailed to the financial institution and the disapproval shall be effective upon notification. Any financial institution so notified shall immediately require the individual to disassociate himself or herself from the financial institution.

      
      

   2. A financial institution shall not allow an individual which has been proposed to become a member of the board of directors or employed as an executive officer, or equivalent position, to serve in such capacity before the expiration of the 30 day review period unless the Department notifies the financial institution of an intention not to disapprove the individual.

      
      

   3. The Department will conduct background investigations on individuals proposed to become a director or executive officer, or equivalent position. The investigations shall, in general, include contacts with the FBI, local law enforcement and prosecutorial agencies, federal and state financial institution regulatory agencies, and other federal and state government agencies. Background investigations of proposed individuals who are not citizens of the United States will include appropriate foreign and international contacts.

   4. If the Department makes a request for additional information during the review of an incomplete notice, the financial institution must provide the information within 25 days of such a Departmental request or request in writing that the Department suspend processing of the notice.

      
      

   5. If the Department does not timely receive the information it requested pursuant to paragraphs (3)(c) or (3)(d) concerning an individual proposed by the financial institution, or if the Department requires additional time to fully review the notice or information requested pursuant to paragraphs (3)(c) or (3)(d), the Department shall suspend the processing of the notice for an additional

      60 days.

      
      

   6. The processing of a substantially complete notice shall also be suspended for a period of up to 60 days or such longer period of time if such suspension is requested by the financial institution and the Department determines that such a delay will not be detrimental to the safety and soundness of the concerned institution or cause a risk of harm to the public interest.

4. Requests For Interim Appointment

   
   

   1. Any financial institution may file a written request with the Department to permit an individual proposed as a director or executive officer, or equivalent position, to assume his or her position on an interim basis prior to the expiration of the 30 day prior notice period or applicable period of suspension.

      
      

   2. The Department shall not consider a request for interim appointment or employment of a director or executive officer, or equivalent position, unless the Department has received a completed Form DBF-C-10-B for the proposed individual.

      
      

   3. The Department shall only grant a request for the interim appointment or employment of a director or executive officer, or equivalent

      position, if the interim appointment or employment is not likely to cause a risk of harm to the financial institution or the public interest.

      
      

   4. The granting of a request for the interim appointment or employment of an individual to the position of director or executive officer, or equivalent position, shall not affect the Department's ability to subsequently issue a notice of disapproval or suspend the 30 day prior notice period.

   
   

5. Regulatory Standards for Evaluating Requests for Proposed Directors or Executive Officers or Equivalent Positions:

   
   

   1. The financial institution may appoint or employ an individual to begin service as a director or executive officer, or equivalent position, on a permanent basis if:

      
      

      1. The Department notifies the financial institution of an intent not to disapprove

         the proposed director or executive officer, or equivalent position; or

         
         

      2. The 30 day review period expires and was not extended or suspended, by the Department or the financial institution, and during such review period the concerned individual was not disapproved.

      
      

   2. The Department shall issue a notice of disapproval if the character, integrity, or business acumen or judgment of the proposed individual to be appointed or employed indicates that it is not in the best interests of the depositors, members, or the public to permit the individual to be employed by or associated with the state financial institution.

      
      

   3. Unless the Department finds, in writing, that the proposed individual has shown rehabilitation, the proposed director or executive officer, or equivalent position, shall not be eligible for permanent or interim employment, if the individual:

      1. Has been convicted or has entered a plea of guilty or nolo contendre, regardless of adjudication, to a felony or of an offense involving moral turpitude, dishonesty, a breach of trust, a violation of state or federal financial institution law, the Florida Financial Institution Codes, or fraud;

         
         

      2. Has been removed by any regulatory agency as a director, officer, or employee of any financial institution;

         
         

      3. Has performed acts of fraud or dishonesty, or has failed to perform duties, resulting in a loss to a financial institution; or

         
         

      4. Has been convicted or found guilty, regardless of adjudication, of a violation of Section 655.50, Florida Statutes, relating to the Florida Control of Money Laundering in Financial Institutions Act; Chapter 896, relating to offenses related to financial transactions; or any similar state or federal law.

      
      

   4. If an individual proposed as a director or executive officer, or equivalent position, has demonstrated a lack of responsibility in relation to financial matters which is reflected by either the credit worthiness of the person or by such person's business history, it shall be permissible to consider such a condition in evaluating the integrity in managing one's personal financial affairs.

      
      

   5. Material errors or omissions in any information submitted to the Department regarding an individual shall be grounds for a finding by the Department that the individual fails to meet the requisite standards for service as a director or executive officer, or equivalent position, of a state financial institution.

      
      

   6. If an individual is proposed for the position of chief executive officer, president, or equivalent position, he or she shall have had at least 1 year of direct experience, including policy making responsibilities, as an executive officer,

      financial institution regulator, or director of a financial institution within the last 3 years.

      
      

   7. If the proposed executive officer, president, or equivalent position is to be employed by a state financial institution that does not meet the minimum capital requirements or is otherwise operating in an unsafe or unsound condition, the Department shall, based on the unique needs of the financial institution, require more extensive financial institution experience.

      The provisions of Rule 3C-100.0385, Florida Administrative Code, have the force and effect of law, and must be followed by the Department in exercising its authority under Section 655.0385, Florida Statutes, except in those cases where a variance or waiver has been granted.3 See State v. Jenkins, 469 So.2d 733, 734 (Fla. 1985)("agency rules and regulations, duly promulgated under the authority of law, have the effect of law"); Buffa v. Singletary, 652 So.2d 885, 886 (Fla. 1st DCA 1995)("[a]n agency must comply with its own rules"); Decarion v. Martinez,

      537 So.2d 1083, 1084 (Fla. 1st 1989)(“[u]ntil amended or abrogated, an agency must honor its rules").

      Petitioner's Standing

      
      

      "[N]ot everyone having an interest in the outcome of particular dispute over an agency's interpretation of the law submitted to its charge, or the agency's application of that law in determining the rights and interests of members of government or the public, is entitled to participate as a party in an administrative proceeding to resolve that dispute. Were that not

      so, each interested citizen could, merely by expressing an interest, participate in the agency's efforts to govern, a result that would unquestionably impede the ability of the agency to function efficiently and inevitably cause an increase in the number of litigated disputes well above the number that administrative and appellate judges are capable of handling.

      Therefore, the legislature must define and the courts must enforce certain limits on the public's right to participate in administrative proceedings. The concept of standing is nothing more than a selective method for restricting access to the adjudicative process, whether it be administrative or purely judicial,4 limiting the proceeding to actual disputes between persons whose rights and interests subject to protection by the statutes involved are immediately and substantially affected.

      Thus, it has been stated, the 'purpose of the law of standing is to protect against improper plaintiffs.'"5 Florida Society of Ophthalmology v. Board of Optometry, 532 So.2d 1279, 1284 (Fla. 1st DCA 1988).

      "Under section 120.57, a party may petition for an administrative evidentiary hearing to contest any proposed6 final state agency action where the proposed final agency action would affect that party's substantial interest and where there is a disputed issue of material fact which formed the basis for the proposed final action." Florida Sugar Cane League v. South

      Florida Water Management District, 617 So.2d 1065, 1066 (Fla. 4th DCA 1993).

      A party seeking a Section 120.569/57 hearing has the burden of establishing its entitlement thereto. See Florida Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778, 788 (Fla. 1st DCA 1981); Florida Department of Health and Rehabilitative Services v. Alice P., 367 So.2d 1045, 1052 (Fla. 1st DCA 1979); Florida Department of Health and Rehabilitative Services v. Career Service Commission, 289 So.2d 412, 415 (Fla. 4th DCA 1974). In order to establish that its substantial interest will be affected by the proposed agency action (and that it therefore has standing to challenge such proposed action pursuant to Section 120.569/57, Florida Statutes), the party must show that "(1) the proposed action will result in injury-in-fact which is of sufficient immediacy to justify a hearing; and7 (2) the injury is of the type that the statute pursuant to which the agency has acted is designed to protect."8 Fairbanks, Inc., v.

      Department of Transportation, 635 So.2d 58, 59 (Fla. 1st DCA 1994); Friends of the Everglades, Inc., v. Board of Trustees of the Internal Improvement Trust Fund, 595 So.2d 186, 188 (Fla. 1st DCA 1992). If the injury alleged is hypothetical, conjectural or speculative, rather than real and immediate, it is insufficient to entitle the party to a Section 120.569/57 hearing. See Board of Optometry v. Florida Society of Ophthalmology, 538 So.2d 878, 881 (Fla. 1st DCA 1988); Village Park Mobile Home Association,

      Inc., v. Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes, 506 So.2d 426, 433-34 (Fla. 1st DCA 1987); Montgomery v. Department of Health and Rehabilitative Services, 468 So.2d 1014, 1016 (Fla. 1st DCA 1985); Florida Department of Offender Rehabilitation v. Jerry, 353 So.2d 1230, 1236 (Fla. 1st DCA 1978).

      In the instant case, Petitioner has petitioned for a Section 120.569/57 hearing to contest the Department's decision not to disapprove McLaughlin as a director of Sunniland. She claims that McLaughlin is unqualified to serve as a director of the bank and that, as "a depositor and the single largest shareholder of Sunniland . . ., who controls 46 percent of the bank's outstanding common shares," she will suffer, as a result of the Department's failure to disapprove McLaughlin, an injury to her substantial interests entitling her to administratively challenge the decision of the Department.

      Notwithstanding Petitioner's assertion to the contrary, it does not appear that the Department's failure to disapprove McLaughlin as a director of Sunniland "will result in injury-in- fact [to Petitioner] which is of sufficient immediacy to justify a [Section 120.569/57] hearing." As a depositor and shareholder of Sunniland, Petitioner does have an interest in protecting the monies she has on deposit in the bank and the value of her Sunniland stock. It is a matter of conjecture and speculation, however, that Petitioner will suffer any loss of her deposit

      monies or decrease in the value of her stock as a result of the Department's failure to disapprove McLaughlin as a director of the bank.

      The immediate consequence of the Department’s failure to disapprove McLaughlin as a director of Sunniland was simply that his appointment to the bank’s board of directors (pursuant to the vote of the bank’s shareholders) became effective. By failing to veto McLaughlin’s appointment, the Department did not authorize McLaughlin (in his capacity as a director of Sunniland), or any of the other members of the bank’s board of directors,9 to act in a manner injurious to the interests of depositors or shareholders of the bank, nor did the Department relinquish its regulatory authority over the bank (including the authority to issue cease and desist orders pursuant to Section 655.033, Florida Statutes, to remove directors and other financial institution-affiliated parties pursuant to Section 655.037, Florida Statutes, and to impose administrative fines for violations of state banking laws and Department cease and desist orders pursuant to Section 655.041, Florida Statutes) or surrender its power to seek injunctive relief in circuit court pursuant to Section 655.034, Florida Statutes. Furthermore, the Department’s failure to disapprove McLaughlin as a director did not affect the ability of Sunniland depositors to withdraw their deposit monies from the bank, nor did it have any impact on the ability of Sunniland shareholders to judicially challenge actions of the bank’s board

      of directors that they allege constitute a breach of the directors’ fiduciary duty to the corporation and its shareholders.10

      In short, the Department did no more than merely decline to stand in the way of McLaughlin becoming a member of the collegial body responsible for directing the business and affairs of the Sunniland.11 The Department’s inaction itself did not have any real and immediate adverse effect on the deposits in the bank or the value of the stock held by the bank’s shareholders. The prospect that the bank’s current depositors and shareholders will ultimately be harmed as a byproduct of the Department’s nondisapproval of McLaughlin is dependent on not only the post- nondisapproval actions of McLaughlin (in his capacity as a director of the bank), but also those of his colleagues on the board, as well as the post-nondisapproval actions taken on behalf of and by depositors and shareholders to protect against and avoid the occurrence of such harm. Because any injury that Petitioner may suffer as a current depositor and shareholder of the bank as a consequence of the Department’s nondisapproval of McLaughlin is dependent on these intervening factors, such injury lacks the immediacy necessary to entitle Petitioner to administratively challenge such nondisapproval pursuant to Chapter 120, Florida Statutes, as a party whose substantial interests would be affected by the nondisapproval. See Village Park Mobile Home Association, Inc. v. Department of Business

      Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes, 506 So.2d 426 (Fla. 1st DCA 1985).

      Furthermore, neither Section 655.0385, Florida Statutes, Rule 3C-100.0385, Florida Administrative, nor any other statutory or rule provision or any constitutional provision entitles Petitioner as a current depositor and shareholder of the bank to initiate such a challenge. An examination of Section 655.0385, Florida Statutes, and Rule 3C-100.0385, Florida Administrative Code, reveals no indication of any intent to involve the depositors or shareholders of a financial institution in the process to determine whether a proposed director of the institution should be disapproved by the Department. (Compare with Section 120.80(3), Florida Statutes.) Rather, it appears from such an examination (particularly of those portions of Rule 3C-100.0385, Florida Administrative Code, dealing with the Department’s notification of its decision to disapprove or not to disapprove, which provide for notification only to the financial institution) that it was envisioned that there would be no other participants in the disapproval/nondisapproval process other than the Department and the financial institution and that any interest that depositors and shareholders of the financial institution might have in the outcome of the process would be adequately represented by the Department and (at least in the case of the shareholders12) the financial institution.13 Cf.

      South Florida Regional Planning Council v. Florida Land and Water

      Adjudicatory Commission, 372 So.2d 159, 167 (Fla. 3d DCA 1979)(South Florida Regional Planning Council (SFRPC) did not have standing to challenge a binding letter of interpretation issued by the Division of Land Planning to the developer of a proposed development in Dade County inasmuch as “SFRPC lack[ed] a substantial interest which [wa]s not otherwise represented by the Division”).

      
      

      The Department’s Authority to Grant the Relief Requested

      
      

      The Department must exercise its authority to disapprove proposed directors and executive officers of financial institutions like Sunniland strictly in accordance with the provisions of Section 655.0385, Florida Statutes, as implemented by Rule 3C-100.0385, Florida Administrative Code. See City of Cape Coral v. GAC Utilities, Inc., of Florida, 281 So.2d 493, 495(Fla. 1973)(“[a]ll administrative bodies created by the Legislature are . . . simply mere creatures of statute;” “[a]s such, [their] powers, duties and authority are those and only those that are conferred expressly or impliedly by statute of the State;” “[a]ny reasonable doubt as to the lawful existence of a particular power that is being exercised by [an administrative agency] must be resolved against the exercise thereof, . . . and the further exercise of the power should be arrested”). Rule 3C- 100.0385, Florida Administrative Code, establishes a time frame within which the Department must act to disapprove a proposed director or executive officer. It further provides that the

      proposed director’s or executive officer’s appointment becomes “permanent” if the Department does not issue a letter of disapproval within the prescribed time frame. In the instant case, the prescribed time for taking action to disapprove McLaughlin’s proposed appointment to Sunniland’s board of directors has expired14 and it therefore is too late for the Department to take such action. Accordingly, even if the Department, upon further reflection, was now persuaded that McLaughlin does not meet the standards set forth in Section 655.0385, Florida Statutes, and Rule 3C-100.0385, Florida Administrative Code, for appointment to the board of directors of a financial institution (like Sunniland) “operating in an unsafe and unsound condition,” the Department would nonetheless be without authority to block his proposed appointment (by issuance of a letter of disapproval) inasmuch as his proposed appointment has already become “permanent” by operation of Rule 3C-100.0385, Florida Administrative Code, based upon the Department’s failure to take timely disapproval action.15 See Krakow v. Department of Professional Regulation, Board of Chiropractic, 586 So.2d 1271, 1273 (Fla. 1st DCA 1991); World Bank v. Lewis, 425 So.2d 77, 79 (Fla. 1st DCA 1982).

      RECOMMENDATION

      
      

      In light of the foregoing, it is hereby

      
      

      RECOMMENDED that the Department issue a final order dismissing Petitioner’s amended petition on the grounds that

      Petitioner lacks standing to administratively challenge the Department’s decision not to disapprove McLaughlin’s proposed appointment to Sunniland’s board of directors and that the Department, having failed to act within the time frame prescribed by Rule 3C-100.0385, Florida Administrative Code, does not have the authority to reconsider its decision and issue a letter of disapproval, as requested by Petitioner.16

      
      

      DONE AND ENTERED this 11th day of April, 1997, in Tallahassee, Florida.

      
      

      STUART M. LERNER

      Administrative Law Judge

      Division of Administrative Hearings The DeSoto Building

      1230 Apalachee Parkway

      Tallahassee, Florida 32399-3060

      (904) 488-9675 SUNCOM 278-9675

      Fax Filing (904) 921-6847

      
      

      Filed with the Clerk of the Division of Administrative Hearings this 11th day of April 1997.

      
      

      ENDNOTES

      
      

      1 Sunniland was required to notify the Department of McLaughlin’s proposed appointment to its board of directors because it was operating in a manner that had been deemed to be “unsafe and unsound,” within the meaning of Section 655.0385(1)(d), Florida Statutes.

      2 It appears from an examination of Section 655.0385, Florida Statutes, together with the other provisions of the state’s financial institutions codes, that, contrary to the position taken by Petitioner, the term “members,” as used in Section 655.0385, Florida Statutes, refers to the members of a credit union, not to stockholders or shareholders of a bank. Particularly instructive is a comparison of the language used in

      Section 655.0385, Florida Statutes, with the language used in Sections 655.033, 655.034, and 655.037, Florida Statutes, which provide, in pertinent part, as follows:

      
      

      1. Cease and desist orders.-

         
         

6. Whenever the [D]epartment finds that conduct described in subsection (1) is likely to cause . . . substantial prejudice to the depositors, members, or shareholders, it may issue an emergency cease and desist order requiring the state financial institution . .

.or financial institution-affiliated party to immediately cease and desist from engaging in the conduct complained of and to take corrective action.

1. Injunctions.-

Whenever a violation of the financial institutions codes is threatened or impending and such violation will cause substantial injury to a state financial institution or the depositors, members, creditors, or stockholders thereof, the circuit court has jurisdiction to hear any complaint filed by the [D]epartment and, upon proper showing, to issue an injunction restraining such violation or granting other such appropriate relief.

655.037 Removal of a financial-institution- affiliated party by the [D]epartment.-

(3) If . . . a hearing is held and the [D]epartment finds that any of the charges in the complaint are true and that the state financial institution has suffered or will suffer loss or other damage or that the interests of the depositors, members, or shareholders could be seriously prejudiced by reason of such violation or practice or breach of fiduciary duty . . . the [D]epartment may enter an order removing the financial institution-affiliated party or restricting or prohibiting participation by such financial institution-affiliated party in the affairs of that particular state financial institution. . . .

(Emphasis added.) The presence of the term “shareholders” or “stockholders“ together with the term “members” in Sections 655.033, 655.034, and 655.037, Florida Statutes, is compelling evidence that the term “members,” as used in Chapter 655, Florida Statutes (including Section 655.0385, Florida Statutes, which, unlike Sections 655.033, 655.034, and 655.037, Florida Statutes, makes no specific mention of “shareholders” or “stockholders”), does not refer to the stockholders or shareholders of a bank.

See Department of Professional Regulation, Board of Medicine, v. Durrani, 455 So.2d 515, 518 (Fla. 1st DCA 1984); Ocasio v.

Bureau of Crimes Compensation, Division of Workers’ Compensation,

408 So.2d 751, 753 (Fla. 3d DCA 1982). In any event, even if it did refer to a bank’s stockholders and shareholders, the undersigned’s recommended disposition of the instant case would remain the same.

3 Pursuant to Section 120.542, Florida Statutes, a ”person who is subject to regulation by an agency rule may file a petition with that agency requesting a variance or waiver from the agency’s rule.” There is no reference in any of the pleadings filed with the undersigned to any such variance or waiver having been sought or obtained in connection with the instant case.

4 “It has been held many times that a public spirited citizen or taxpayer has no right to enter a controversy with the legal issue involved in the court because of his belief that one side or the other should prevail for the benefit of his city, county or state.” Charlotte County Development Commission v. Lord, 180 So.2d 198, 199 (Fla. 2d DCA 1965).

5 It has also been stated that "standing" is the "requisite personal interest that must exist at the commencement of the litigation." Montgomery v. Department of Health and Rehabilitative Services, 468 So.2d 1014, 1016 (Fla. 1st DCA 1985).

6 A Section 120.569/57 hearing is intended "to formulate agency action, not to review action taken earlier and preliminarily." Young v. Department of Community Affairs, 625 So.2d 831, 833 (Fla. 1993); Hamilton County Board of County Commissioners v. Department of Environmental Regulation, 587 So.2d 1378, 1387 (Fla. 1st DCA 1991); Boca Raton Artificial Kidney Center, Inc., v. Florida Department of Health and Rehabilitative Services, 475 So.2d 260, 262 (Fla. 1st DCA 1985); DeCarion v. Department of Environmental Regulation, 445 So.2d 619, 621 (Fla. 1st DCA 1984); Capeletti Brothers, Inc., v. Department of General Services, 432 So.2d 1359, 1364 (Fla. 1st DCA 1983); McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977).

7 Both prongs of this two-prong test must be met.

8 Such a showing need not be made if the prospective challenger,

"as a matter of constitutional right, provision of statute, or provision of agency regulation, is entitled to participate in whole or in part in the proceeding." Section 120.52(12)(b), Fla. Stat. For instance, pursuant to Section 120.80(3), Florida Statutes, in matters concerning "the issuance, denial, renewal, or amendment of a license or approval of a merger pursuant to title XXXVIII: . . ., any person may request a hearing." In the instant case, Petitioner does not argue that her standing to challenge the Department's decision not to disapprove McLaughlin as a director of Sunniland is based on anything other than the decision's alleged impact on her.

9 Section 658.33, Florida Statutes, requires that “[t]he board of directors of a bank . . . consist of at least five directors.”

10 Section 607.0830(1), Florida Statutes, provides that a director must discharge his or her duties as a director: “[i]n good faith;” “[w]ith the care an ordinarily prudent person in a like position would exercise under similar circumstances;” and “[i]n a manner he [or she] reasonably believes to be in the best interests of the corporation.”

11 Section 607.0801, Florida Statutes, provides that “[a]ll corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation or in an agreement authorized under s. 607.0732.”

12 See Rehabilitation Advisors, Inc., v. Floyd, 601 So.2d 1286, 1288 (Fla. 5th DCA 1992)(“[c]orporate directors owe a fiduciary duty to the corporation and to the shareholders and must act in good faith and in the best interest of the corporation”); Cohen v. Hattaway, 595 So.2d 105, 107 (Fla. 5th DCA 1992)(“[c]orporate directors and officers owe a fiduciary obligation to the corporation and its shareholders and must act in good faith and in the best interest of the corporation”); Szteinbaum v. Kaes Inversione y Valores, 476 So.2d 247, 248 (Fla. 3d DCA 1985)(“because a corporation is a ‘hydra-headed entity and its shareholders are insulated from personal responsibility,’ there must be one designated spokesperson accountable to the court”); De La Rosa v. Tropical Sandwiches, Inc., 298 So.2d 471, 472 (Fla. 3d DCA 1974)(“[w]hen such a sale [of corporate property and assets] is accomplished, there is a presumption that the directors acted honestly and in the best interests of the stockholders”); Mease v. Warm Mineral Springs, Inc., 128 So.2d 174, 179 (Fla. 2d DCA 1961)(“[t]he board of directors of a corporation represents the corporate body, and the directors are entrusted with authority to conduct and manage the corporate affairs. Generally the stockholders are without power, aside from that which is delegated to them as agents, to represent the

corporation or act for it in relation to its normal business. Although the ultimate control of a corporation resides in its stockholders, generally speaking, in the absence of statutory authority, the stockholders as such cannot act for the corporation either individually or collectively”); 8 Fla.

Jur.2d, Business Relationships Section 19 (individual shareholders of a corporation “are merged in the corporate identity”); 8 Fla. Jur.2d, Business Relationships Section 230 (“the corporation represents its shareholders in all matters within the scope of its powers”); 8 Fla. Jur.2d, Business Relationships Section 343 (“[a]ll corporate powers must be exercised by or under the authority of its board of directors”);

8. Fla. Jur.2d, Business Relationships Section 360 (“the officers and directors of a corporation occupy toward the corporation and its stockholders a fiduciary relationship and are required to exercise the utmost good faith in the exercise of their powers in the interests of the corporation”).

13 In concluding that Petitioner lacks standing in the instant case, the undersigned has not overlooked the language in Section 655.0385, Florida Statutes, directing the Department, in determining whether to disapprove proposed directors and executive officers, to consider the “best interests of the depositors, the members [and] the public.” It is one thing to mandate that the Department take into consideration the “best interests” of the ”public,” including ”depositors,” in deciding whether to disapprove a proposed director of a bank. It is quite another thing, however, to permit any individual member of the public, upon request, to participate in the disapproval/nondisapproval process as a matter of right without having to show that his or her substantial interests will be affected as a result of the outcome of the process. The Legislature, in enacting Section 655.0385(3), Florida Statutes, has done the former, but not the latter.

14 According to a letter, dated March 12, 1996, from the Department to Sunniland, which was appended to Petitioner’s amended petition, the time period for taking such action began to run on March 7, 1996.

15 A proposed director whose appointment has become “permanent” by operation of Rule 3C-100.0385, Florida Administrative Code, may be removed by the Department in accordance with the provisions of Section 655.037, Florida Statutes, which require that the Department, before taking such action, “issue and serve

. . . a complaint [which] stat[es the] charges” against the director and “must contain the statement of facts and notice of opportunity for a hearing pursuant to s. 120.57.” No such complaint, however, is before the undersigned in the instant case.

Pursuant to Section 655.037, Florida Statutes, only the Department has the authority to issue such a complaint and thereby initiate a removal proceeding. If a person has information indicating that a director is engaging, or has engaged, in conduct warranting removal pursuant to Section 655.037, Florida Statutes, “the proper course is to convey such facts to the [Department,] which has the [exclusive] power to institute proceedings to [remove the director.]” Associated Home Health Agency, Inc., v. Department of Health and Rehabilitative Services, 453 So.2d 104, 106 (Fla. 1st DCA 1984).

16 The final hearing in this case, which is presently scheduled to commence on June 3, 1997, is hereby cancelled.

COPIES FURNISHED:

Raymond B. Vickers, Esquire Meginniss-Dorman House

424 East Call Street Tallahassee, Florida 32301

John B. Fretwell Chief Counsel

Office of the Comptroller

101 East Gaines Street

The Fletcher Building, Suite 526 Tallahassee, Florida 32399-0350

James M. McLaughlin Sunniland Bank

424 West Sunrise Boulevard

Fort Lauderdale, Florida 33311

Lawrence P. Stevenson, Esquire Holland and Knight

Post Office Drawer 810 Tallahassee, Florida 32302

Charles L. Stutts, Esquire Holland and Knight

400 North Ashley Drive, Suite 2300 Tampa, Florida 33602

Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350

Harry Hooper, Esquire General Counsel

Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

11 Sunniland was required to notify the Department of McLaughlin’s proposed appointment to its board of directors because it was operating in a manner that had been deemed to be “unsafe and unsound,” within the meaning of Section 655.0385(1)(d), Florida Statutes.

2 It appears from an examination of Section 655.0385, Florida Statutes, together with the other provisions of the state’s financial institutions codes, that, contrary to the position taken by Petitioner, the term “members,” as used in Section 655.0385, Florida Statutes, refers to the members of a credit union, not to stockholders or shareholders of a bank. Particularly instructive is a comparison of the language used in Section 655.0385, Florida Statutes, with the language used in Sections 655.033, 655.034, and 655.037, Florida Statutes, which provide, in pertinent part, as follows:

1. Cease and desist orders.-

   
   

   (6) Whenever the [D]epartment finds that conduct described in subsection (1) is likely to cause . .

   . substantial prejudice to the depositors, members, or shareholders, it may issue an emergency cease and desist order requiring the state financial institution . . .or financial institution- affiliated party to immediately cease and desist from engaging in the conduct complained of and to take corrective action.

   
   

2. Injunctions.-

Whenever a violation of the financial institutions codes is threatened or impending and such violation will cause substantial injury to a state financial institution or the depositors, members, creditors, or stockholders thereof, the circuit court has jurisdiction to hear any complaint filed by the [D]epartment and, upon proper showing, to issue an injunction restraining such violation or granting other such appropriate relief.

655.037 Removal of a financial-institution- affiliated party by the [D]epartment.-

(3) If . . . a hearing is held and the [D]epartment finds that any of the charges in the complaint are true and that the state financial institution has suffered or will suffer loss or other damage or that the interests of the depositors, members, or shareholders could be seriously prejudiced by reason of such violation or practice or breach of fiduciary duty . . . the [D]epartment may enter an order removing the financial institution-affiliated party or restricting or prohibiting participation by such financial institution-affiliated party in the affairs of that particular state financial institution. . . .

(Emphasis added.) The presence of the term “shareholders” or “stockholders“ together with the term “members” in Sections 655.033, 655.034, and 655.037, Florida Statutes, is compelling evidence that the term “members,” as used in Chapter 655, Florida Statutes (including Section 655.0385, Florida Statutes, which, unlike Sections 655.033, 655.034, and 655.037, Florida Statutes, makes no specific mention of “shareholders” or “stockholders”), does not refer to the stockholders or shareholders of a bank. See Department of Professional Regulation, Board of Medicine, v.

Durrani, 455 So.2d 515, 518 (Fla. 1st DCA 1984); Ocasio v. Bureau of Crimes Compensation, Division of Workers’ Compensation, 408 So.2d 751, 753 (Fla. 3d DCA 1982). In any event, even if it did refer to a bank’s stockholders and shareholders, the undersigned’s recommended disposition of the instant case would remain the same.

3 Pursuant to Section 120.542, Florida Statutes, a ”person who is subject to regulation by an agency rule may file a petition with that agency requesting a variance or waiver from the agency’s rule.” There is no reference in any of the pleadings filed with the undersigned to any such variance or waiver having been sought or obtained in connection with the instant case.

4 “It has been held many times that a public spirited citizen or taxpayer has no right to enter a controversy with the legal issue involved in the court because of his belief that one side or the other should prevail for the benefit of his city, county or state.” Charlotte County Development Commission v. Lord, 180 So.2d 198, 199 (Fla. 2d DCA 1965).

5 It has also been stated that "standing" is the "requisite personal interest that must exist at the commencement of the litigation." Montgomery v. Department of Health and Rehabilitative Services, 468 So.2d 1014, 1016 (Fla. 1st DCA 1985).

6A Section 120.569/57 hearing is intended "to formulate agency action, not to review action taken earlier and preliminarily." Young v. Department of Community Affairs, 625 So.2d 831, 833 (Fla. 1993); Hamilton County Board of County Commissioners v. Department of Environmental Regulation, 587 So.2d 1378, 1387 (Fla. 1st DCA 1991); Boca Raton Artificial Kidney Center, Inc., v. Florida Department of Health and Rehabilitative Services, 475 So.2d 260, 262 (Fla. 1st DCA 1985); DeCarion v. Department of Environmental Regulation, 445 So.2d 619, 621 (Fla. 1st DCA 1984);

Capeletti Brothers, Inc., v. Department of General Services, 432 So.2d 1359, 1364 (Fla. 1st DCA 1983); McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977).

7 Both prongs of this two-prong test must be met.

8Such a showing need not be made if the prospective challenger, "as a matter of constitutional right, provision of statute, or provision of agency regulation, is entitled to participate in whole or in part in the proceeding." Section 120.52(12)(b), Fla. Stat. For instance, pursuant to Section 120.80(3), Florida Statutes, in matters concerning "the issuance, denial, renewal, or amendment of a license or approval of a merger pursuant to title XXXVIII: . . ., any person may request a hearing." In the instant case, Petitioner does not argue that her standing to challenge the Department's decision not to disapprove McLaughlin as a director of Sunniland is based on anything other than the decision's alleged impact on her.

9 Section 658.33, Florida Statutes, requires that “[t]he board of directors of a bank . . . consist of at least five directors.”

10 Section 607.0830(1), Florida Statutes, provides that a director must discharge his or her duties as a director: “[i]n good faith;” “[w]ith the care an ordinarily prudent person in a like position would exercise under similar circumstances;” and “[i]n a manner he [or she] reasonably believes to be in the best interests of the corporation.”

11 Section 607.0801, Florida Statutes, provides that “[a]ll corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation or in an agreement authorized under s. 607.0732.”

12 See Rehabilitation Advisors, Inc., v. Floyd, 601 So.2d 1286, 1288 (Fla. 5th DCA 1992)(“[c]orporate directors owe a fiduciary duty to the corporation and to the shareholders and must act in good faith and in the best interest of the corporation.”); Cohen v. Hattaway, 595 So.2d 105, 107 (Fla. 5th DCA 1992)(“[c]orporate directors and officers owe a fiduciary obligation to the corporation and its shareholders and must act in good faith and in the best interest of the corporation”); Szteinbaum v. Kaes Inversione y Valores, 476 So.2d 247, 248 (Fla. 3d DCA 1985)(“because a corporation is a ‘hydra-headed entity and its shareholders are insulated from personal responsibility,’ there must be one designated spokesperson accountable to the court”); De La Rosa v. Tropical Sandwiches, Inc., 298 So.2d 471, 472 (Fla. 3d DCA 1974)(“[w]hen such a sale [of corporate property and assets] is accomplished, there is a presumption that the directors acted honestly and in the best interests of the stockholders”); Mease v. Warm Mineral Springs, Inc., 128 So.2d 174, 179 (Fla. 2d DCA 1961)(“[t]he board of directors of a corporation represents the corporate body, and the directors are entrusted with authority to conduct and manage the corporate affairs. Generally the stockholders are without power, aside from that which is delegated to them as agents, to represent the corporation or act for it in relation to its normal business. Although the ultimate control of a corporation resides in its stockholders, generally

speaking, in the absence of statutory authority, the stockholders as such cannot act for the corporation either individually or collectively”); 8 Fla. Jur. 2d, Business Relationships Section 19 (individual shareholders of a corporation “are merged in the corporate identity”); 8 Fla. Jur.2d, Business Relationships Section 230 (“the corporation represents its shareholders in all matters within the scope of its powers”); 8 Fla. Jur. 2d, Business Relationships Section 343 (“[a]ll corporate powers must be exercised by or under the authority of its board of directors”); 8. Fla.

Jur. 2d, Business Relationships Section 360 (“the officers and directors of a corporation occupy toward the corporation and its stockholders a fiduciary relationship and are required to exercise the utmost good faith in the exercise of their powers in the interests of the corporation”).

13 In concluding that Petitioner lacks standing in the instant case, the undersigned has not overlooked the language in Section 655.0385, Florida Statutes, directing the Department, in determining whether to disapprove proposed directors and executive officers, to consider the “best interests of the depositors, the members [and] the public.” It is one thing to mandate that the Department take into consideration the “best interests” of the ”public,” including ”depositors,” in deciding whether to disapprove a proposed director of a bank. It is quite another thing, however, to permit any individual member of the public, upon request, to participate in the disapproval/nondisapproval process as a matter of right without having to show that his or her substantial interests will be affected as a result of the outcome of the process. The Legislature, in enacting Section 655.0385(3), Florida Statutes, has done the former, but not the latter.

14 According to a letter, dated March 12, 1996, from the Department to Sunniland, which was appended to Petitioner’s amended petition, the time period for taking such action began to run on March 7, 1996.

15 A proposed director whose appointment has become “permanent” by operation of Rule 3C-100.0385, Florida Administrative Code, may be removed by the Department in accordance with the provisions of Section 655.037, Florida Statutes, which require that the Department, before taking such action, “issue and serve . . . a complaint [which] stat[es the] charges” against the director and “must contain the statement of facts and notice of opportunity for a hearing pursuant to s. 120.57.” No such complaint, however, is before the undersigned in the instant case.

Pursuant to Section 655.037, Florida Statutes, only the Department has the authority to issue such a complaint and thereby initiate a removal proceeding. If a person has information indicating that a director is engaging, or has engaged, in conduct warranting removal pursuant to Section 655.037, Florida Statutes, “the proper course is to convey such facts to the [Department,] which has the [exclusive] power to institute proceedings to [remove the director.]” Associated Home Health Agency, Inc., v.

Department of Health and Rehabilitative Services, 453 So.2d 104, 106 (Fla. 1st DCA 1984).

16 The final hearing in this case, which is presently scheduled to commence on June 3, 1997, is hereby cancelled.

Docket for Case No: 96-003805

Orders for Case No: 96-003805