Bank Board Must Face Shareholder Claims It Tried to Block Its Own Removal
By CU Today Staff —
TAMPA, Fla.—A federal judge has refused to dismiss a shareholder lawsuit accusing the board of First National Bank of Pasco and its parent of changing corporate rules to protect directors from removal following regulatory problems tied in part to the bank’s cannabis-related business, Law360 reported.
Senior U.S. District Judge Steven D. Merryday on Tuesday found shareholder DEF Trading LLC had sufficiently alleged that directors acted in their own interests in an effort to remain in control, allowing the case to proceed. The lawsuit, filed in October 2025 in the U.S. District Court for the Middle District of Florida, names the bank, parent Florida Bancshares Inc. and seven directors as defendants.
The dispute grew out of regulatory scrutiny of the Dade City, Fla.-based bank after it expanded into serving cannabis-related businesses. DEF Trading has alleged the bank lacked personnel and directors with sufficient experience to manage the compliance demands associated with that business and that those shortcomings contributed to an Office of the Comptroller of the Currency investigation. The shareholder alleges the board subsequently amended the company’s bylaws in August 2025 to make it more difficult for shareholders to replace directors. The suit seeks more than $3 million in damages as well as changes in bank leadership.
The OCC entered into a formal agreement with First National Bank of Pasco in September 2025 after finding unsafe or unsound practices involving board oversight and corporate governance, strategic and capital planning, Bank Secrecy Act/anti-money-laundering risk management and suspicious activity reporting, along with violations involving SARs and due diligence for correspondent accounts. The agreement required a series of corrective actions, including enhanced board oversight and compliance controls.
The litigation has already produced a significant ruling against the bank’s board. In May, Merryday ordered a 60-day postponement of the bank’s annual shareholder meeting and permitted director candidates nominated by DEF Trading to stand for election, after the shareholder challenged bylaw changes affecting its ability to nominate directors and call a special meeting. The regulatory backdrop has since changed: the OCC in August terminated its September 2025 formal agreement with First National Bank of Pasco. The OCC said enforcement actions are terminated when a bank has demonstrated compliance, when outstanding provisions have become outdated or irrelevant, or when they are incorporated into a new action.
Originally reported by CU Today.