Migdal v. State

CATHELL, Judge. Petitioners, David Migdal and Linda B. Rohrbaigh, 1 filed a complaint on February 23, 1999 in the Circuit Court for Montgomery County, seeking a declaratory judgment that Maryland Code (1975, 1999 RepLVol.), section 2-405.3 of the Corporations and Associations Article was enacted in violation of Article III, section 29 of the Constitution of Maryland, commonly known as the “one-subject rule.” The State filed a motion to dismiss on the grounds of ripeness, necessary parties, standing, and sovereign immunity. The motion was denied after a hearing on June 28, 1999. Petitioners immediately submitted an amended complaint on June 29, 1999 to add the Governor of Maryland as an additional party defendant and to add additional allegations regarding justiciability, to which the State filed an answer.

After informal discovery, the parties filed two stipulations to facilitate the circuit court’s decision-making process. Both parties filed additional exhibits in support of their cross-motions for summary judgment. On October 14, 1999, the circuit court entered a declaratory judgment in favor of the State. Petitioners filed a notice of appeal the next day.

Prior to briefing in the Court of Special Appeals, we granted the petition for writ of certiorari filed by petitioners. We shall reverse. I. Facts House Bill 356 was introduced by Maryland Delegates Robert Frank and Ann Marie Doory on January 30, 1998. The bill was designed to amend section 2-405 of the Corporations & Associations Article by adding a new subsection that applied only to directors of mutual funds.

The bill was ³¹¹ initially introduced at the request of T. Rowe Price and others in the mutual fund industry in an effort to overrule the holding of a case in the United States District Court for the Southern District of New York. See Strougo v. Scudder, Stevens & Clark, Inc., 964 F.Supp. 783 (S.D.N.Y.1997). In its title, the bill stated it was “[for] the purpose of providing that certain directors of certain investment companies shall be deemed to be independent and disinterested for purposes of performing their duties.” On March 27, 1998, the House of Delegates passed House Bill 356 by a vote of 83 to 36 (22 Delegates did not vote). In the Senate, the bill was assigned to the Senate Committee on Judicial Proceedings.

The Judicial Proceedings Committee held a public hearing on this bill on April 7,1998, during which representatives from both sides of the issue presented written and oral testimony. On April 9, 1998, the Judicial Proceedings Committee voted 8 to 3 against the measure and issued an unfavorable report, thereby killing House Bill 356. In response to the rejection of House Bill 356, T. Rowe Price and other mutual fund firms held a meeting with representatives of the Governor and the Senate leadership on April 10, 1998, informing them that, if the substance of House Bill 356 was not enacted before the end of the 1998 legislative session, the firms would collectively consider reincorporating in Delaware. On Saturday, April 11, 1998, the text of the defeated House Bill 356 was engrafted onto an existing, unrelated bill—Senate Bill 468.

Senate Bill 468 had previously been unanimously approved by the Senate Judicial Proceedings Committee, had passed the Senate on a vote 44 to 0, and had reached a second reader in the House of Delegates. In its title, Senate Bill 468 stated that it was “[for] the purpose of establishing that certain persons must provide written consent before being designated resident agents; altering the requirements relating to certain fees paid by certain resident agents; and generally relating to resident agents.” It applied, generally, to all resident agents of any corporation or association. ³¹² In the House of Delegates, a floor amendment was offered that added the provisions of House Bill 356, as amended, to Senate Bill 468 and altered the short title to read “Corporations and Associations—Resident Agents and Directors.” The amended bill, including the text of defeated House Bill 356, was approved by the House on a vote of 113 to 10. On April 13,1998, the last day of the 1998 legislative session, the Senate Judicial Proceedings Committee voted 8 to 3 for the amended bill; however, in its explanation of its concurrence in the amended Senate Bill 468, it noted that “[t]he House tacked on a bill that the [Senate] Judicial Proceedings Committee killed last week.” That same day, the amended Senate Bill 468, including the substance of the defeated House Bill 356, passed the Senate by a vote of 26 to 20. The original sponsor of Senate Bill 468 spoke and voted against the bill on the Senate Floor.

Delegate John S. Morgan wrote to Mr. Ronald B. Rubin in a letter postmarked April 14, 1998, that House Bill 356 “was attached to an unrelated piece of legislation to resurrect it after an unfavorable report by [the] Senate [Judicial Proceedings Committee].” The bill was signed by the Governor as 1998 Maryland Laws, Chapter 397. The Act as subsequently amended by the inclusion of the provisions of House Bill 356 and enacted provided: CHAPTER 397 (Senate Bill 468) AN ACT concerning Corporations and Associations—Resident Agents - Written Consent and Directors FOR the purpose of establishing-that certain persons must provide written consent before being designated resident agents; altering the requirements-relating to certain fees paid-by certain resident agents prohibiting certain entities from designating a person as a resident agent without first obtaining the person’s written consent; requiring the ³¹³ written consent to be filed with the Department of Assessments and Taxation; making the consent effective upon acceptance by the Department; authorizing a resident agent to resign without paying a certain fee; providing that certain directors of certain investment companies shall be deemed to be independent and disinterested for purposes of performing their duties; providing for the application of certain provisions of this Act; and generally relating to resident agents and directors of corporations. BY adding to Article—Corporations and Associations Section 1-208 and %-j05.8 Annotated Code of Maryland (1993 Replacement Volume and 1997 Supplement) SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND.

That the Laws of Maryland read as follows: Article—Corporations and Associations 1-208. (A) NOTWITHSTANDING ANY OTHER PROVISION OF THIS TITLE, AN ENTITY THAT IS REQUIRED TO HAVE A RESIDENT AGENT MAY NOT DESIGNATE A PERSON AS A RESIDENT AGENT WITHOUT FIRST OBTAINING THE PERSON’S WRITTEN CONSENT. (B) (1) AN ENTITY SHALL FILE A RESIDENT AGENT’S WRITTEN CONSENT WITH THE DEPARTMENT. (2) THE CONSENT SHALL BE EFFECTIVE UPON ACCEPTANCE BY THE DEPARTMENT.

(C) SUBSECTIONS (A) AND (B) OF THIS SECTION DO NOT APPLY TO RESIDENT AGENTS DESIGNATED BEFORE OCTOBER 1, 1998. (D) (1) A PERSON DESIGNATED A RESIDENT AGENT WITHOUT CONSENT BEFORE OCTOBER 1-, ³¹⁴ 1998 MAY RESIGN WITHOUT PAYING THE FEE UNDER § 1-203(2) OF THIS SUBTITLE. (2) THE ENTITY T-HAT DESIGNATED A RESIDENT AGENT WHO-RESIGNS UNDER PARAGRAPH (1) OF THIS-SUBSECTION SHALL PAY THE-FEE UNDER § 1-203(2) OF-THIS SUBTITLE. SECTION 2.

AND BE IT FURTHER ENACTED. That the Laws of Maryland read as follows: Article—Corporations and Associations 2-105.3. (A) THIS SECTION APPLIES TO A CORPORATION THAT IS AN INVESTMENT COMPANY, AS DEFINED BY THE INVESTMENT COMPANY ACT OF 1910. (B) A DIRECTOR OF A CORPORATION WHO WITH RESPECT TO THE CORPORATION IS NOT AN INTERESTED PERSON, AS DEFINED BY THE INVESTMENT COMPANY ACT OF 1940, SHALL BE DEEMED TO BE INDEPENDENT AND DISINTERESTED WHEN MAKING ANY DETERMINATION OR TAKING ANY ACTION AS A DIRECTOR.

SECTION 3. AND BE IT FURTHER ENACTED. That Section 2 of this Act shall be construed retroactively and shall be applied to and interpreted to affect only those cases,filed on or after January 30, 1998. SECTION 2t A AND BE IT FURTHER ENACTED.

That this Act shall take effect October 1,1998. Approved May 12,1998.

II

The “One-Subject” Rule Article III, section 29 of the Maryland Constitution provides that “every Law enacted by the General Assembly shall embrace but one subject.” We discussed the history behind the enactment of section 29 extensively in Porten Sullivan Corp. v. State, 318 Md. 387, 397-400 , 568 A.2d 1111, 1115-16 (1990): ³¹⁵ The “one-subject” restriction of § 29 entered our Constitution in 1851, but perusal of the debates of the 1851 Constitutional Convention reveals little about the purpose of the provision. The one-subject requirement was included, with other language, in an amendment proposed by Mr. Stewart of Caroline County. 1 Debates and Proceedings of the Maryland Reform Convention to Revise the State Constitution 305 (1851). Mr. Stewart explained that “[i]n Louisiana, every law embraced one subject, and the object of the law was expressed in the title page.” Id. at 312. But the discussion of his amendment centered on other aspects, particularly portions that, it was thought, would promote ease of access to the laws and reduction of confusion caused by lack of codification.

Id. at 314. We learn little more from the proceedings of the 1864 and 1867 conventions. At each of them, the one-subject rule was included in the recommendations of the Committee on the Legislative Department (and in the Constitution eventually adopted) but at neither of them was it discussed. 1 The Debates of the Constitutional Convention of the State of Maryland 474 (Bayly 1864); Proceedings of the State Convention of Maryland to Frame a New Constitution 107 (Colton 1867). The 1967 Constitutional Convention Commission Report sheds a bit more light on the matter.

Although the constitution drafted by the Constitutional Convention Commission (and in substance adopted by the Convention) was not ratified by the voters, § 3.15 of the draft document included the requirement that “[ejvery law enacted by the General Assembly shall embrace only one subject, which shall be described in its title.” The Commission believed that the reasons for requiring a single subject and a descriptive title are still valid and that the requirement is desirable. The absence of such a provision might in some instances make it necessary for a legislator to acquiesce in an undesirable bill in order to secure useful and necessary legislation. ³¹⁶ Report of the Constitutional Convention Commission 141 (1967). One reason for the relatively limited discussion, in Maryland constitutional history, of the reasons for the single-subject rule may be that it is one that has been applied for centuries. During Roman times, there was a prohibition against proposing laws that contained more than one subject. ...

Many states recognize that a purpose of the one-subject rule is “to prevent ‘riders’ from being attached to bills that are popular and so certain of adoption that the rider -will secure adoption not on its own merits, but on the merits of the measure to which it is attached.” An additional purpose of the single-subject rule is to “protect the integrity of the governor’s veto power.” In Brown v. Firestone, the Supreme Court of Florida said that a purpose of the one-subject rule is to prevent “a practice under which the legislature could include in a single act matters important to the people and desired by the Governor and other matters opposed by the Governor or harmful to the welfare of the state, with the result that in order to obtain the constructive or desired matter the Governor had to accept the unwanted portion. The veto power of the chief executive [would] thereby [be] severely limited if not destroyed and one of the intended checks on the authority of the legislature [would be] able to be negated in practice.” 382 So.2d 654, 663-664 (Fla.1980) (quoting Green v. Rawls, 122 So.2d 10, 13 (Fla.1960)). [Brackets in Porten Sullivan Corp.] [Some citations omitted.] We discussed the intended policy of Article III, section 29 in Neuenschwander v. Washington Suburban Sanitary Comm’n, 187 Md. 67, 77-78 , 48 A.2d 593, 598-99 (1946): This requirement that every law shall embrace but one subject was written into the Constitution of 1851 because ³¹⁷ there had crept into our system of legislation a practice of engrafting upon measures of great public importance foreign matters for local or selfish purposes, and the members of the Legislature were often constrained to vote for such foreign provisions to avoid jeopardizing the main subject or to secure new strength for it, whereas if these provisions had been offered as independent measures they would not have received such support. In this way the people of the State were frequently inflicted with pernicious legislation. Very often the foreign matters were incorporated into the law stealthily, especially during the haste and confusion that always prevailed near the close of the session, and in this way the statute books contained many enactments which few of the members of the Legislature knew anything about.

See also, e.g., Equitable Life Assurance Soc’y v. State Comm’n on Human Relations, 290 Md. 333, 339 , 430 A.2d 60, 64 (1981) (“The purpose ... of this provision is to prevent the joining in one act of totally unrelated pieces of legislation, which would not have received support if offered independently....”). The key to evaluating a particular piece of legislation under Article III, section 29 appears to be the germaneness of the individual components of the law as passed. For instance in Maryland Classified Employees Ass’n v. State, 346 Md. 1, 15-16 , 694 A.2d 937, 944 (1997), a case in which we held the one-subject rule had not been violated, we noted: Connection and interdependence can be on either a horizontal or vertical plane. Two matters can be regarded as a single subject, for purposes of § 29, either because of a direct connection between them, horizontally, or because they each have a direct connection to a broader common subject to which the Act relates.

See Panitz v. Comptroller, 247 Md. 501, 511-12 , 232 A.2d 891, 896-97 (1967) (otherwise disparate appropriations in supplementary appropriations bill sustainable under § 29 as embracing but one subject— increased financial aid to local subdivisions); see also Baltimore v. Reitz, 50 Md. 574, 579 (1879): “If several sections of the law refer to and are germane