STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA MEDICAL CENTER, )

)

Petitioner, )

)

vs. ) CASE NO. 86-2414F

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

MEMORANDUM DECISION ON ATTORNEY'S FEES PURSUANT TO ORDER OF DISTRICT COURT OF APPEAL, FIRST DISTRICT

For Petitioner: Eric B. Tilton, Esquire

Tallahassee, Florida

For Respondent: R. S. Power, Esquire

Tallahassee, Florida

This matter was heard by William R. Dorsey, Jr., the Hearing Officer designated by the Division of Administrative Hearings in Tallahassee, Florida, on December 9, 1986. Before the hearing, both parties had filed proposed findings of fact and conclusions of law. No transcript of the proceedings was filed.

Introduction

The District Court of Appeal, First District, remanded this matter to the Division of Administrative Hearings on March 4, 1986, to determine a reasonable fee to be awarded against the Department of Health and Rehabilitative Services for the services of the attorneys for Florida Medical Center. The fee award was conditioned on demonstration by Florida Medical Center that it had attempted to intervene at least five days before the scheduled hearing in proceedings filed by Humana Hospital Bennett (Humana Bennett), seeking the issuance of a certificate of need to increase the number of Humana Bennett's licensed medical- surgical beds.

Procedural Background

University Community Hospital (University) and Humana Bennett both applied for certificates of need to add beds to their hospitals in 1981. Both sought and received formal hearings on their applications. After those hearings, both applications were denied in final orders entered by the Department of Health and Rehabilitative Services. Each appealed the denials to the District Court of Appeal, Fourth District.

In 1983, while the appeal from the denial of its 1981 application was pending, Humana Bennett refiled an essentially identical application with the Department of Health and Rehabilitative Services (HRS) for the addition of

medical-surgical beds. After HRS indicated its intention to deny that application, Humana Bennett sought a formal hearing on this 1983 application. South Broward Hospital District and Doctors Hospital intervened in that proceeding. While those proceedings which were triggered by the 1983 application were pending, University and Humana Bennett entered into a settlement agreement with HRS with respect to the appeal pending in the District Court of Appeal, Fourth District. In the settlement, HRS agreed to approve additional beds for both hospitals; University agreed to dismiss its appeal and Humana Bennett agreed to dismiss both its appeal and the Section 120.57(1) proceeding it had initiated on its 1983 application. South Broward Hospital District and Doctors Hospital were not involved in that settlement, however, and did not agree to the dismissal of the proceeding on Humana Bennett's 1983 application in which they had already intervened. The settlement agreement executed by HRS, University and Humana Bennett stated that the certificates of need issued under it would constitute final agency action.

Florida Medical Center and Doctors Hospital filed new Section 120.57(1) proceedings, to challenge the certificates of need issued to University and Humana Bennett under the settlement agreement. South Broward Hospital District also filed a petition which challenged only the Humana Bennett settlement. The Department denied these petitions without any hearing, on the grounds that Humana Bennett's competitors lacked standing to challenge those certificates of need because economic injury to competitors of Humana Bennett was insufficient to give them standing.

On appeal from that order denying hearings, the District Court of Appeal, First District, found that the Department had to grant Humana Bennett's competitors hearings. The appellate court also held that the Department had the authority to modify a final order to settle a case on appeal if all parties to the proceeding participated in the settlement. The final order granting the certificate of need to University was affirmed, but the order of the Department granting the certificate of need to Humana Bennett was reversed and remanded because Doctors Hospital and South Broward Hospital District had not agreed to the dismissal of their proceedings challenging Humana Bennett's bed expansion.

The Court also gave Florida Medical Center the opportunity to show on remand whether it had sought to intervene in the proceeding encompassing Doctors Hospital's and South Broward Hospital District's challenge to Humana Bennett's 1983 application more than five days before that matter was to be heard. The Department conceded that the petitions of Doctors Hospital and South Broward Hospital District challenging the ill-fated settlement had not even been set for final hearing when Florida Medical Center's intervention petition was filed.

Florida Medical Center is entitled to an award of attorney's fees pursuant to the March 4, 1986, order of the First District Court of Appeal.

ISSUE

The issue is to determine the amount of the fee to be awarded to Florida Medical Center.

FEE CALCULATION

1. Florida Medical Center was represented before the Department in its attempt to obtain a hearing and before the District Court of Appeal, First District in Florida Medical Center vs. Department of Health and Rehabilitative Services and Humana, Inc., appellate case no. BD-46, by Eric B. Tilton, who has

   been a member of The Florida Bar since 1977. He also handled the appeal of the denial of Florida Medical Center's petition for a hearing on the approval of additional beds for University, appellate case BD-45. An associate, Thomas W. Stahl, assisted Mr. Tilton in both those cases.

   
   

2. Mr. Tilton filed, on behalf of Florida Medical Center, the following pleadings:

   
   

   1. a petition seeking a Section 120.57 hearing to challenge the certificate of need HRS agreed to grant to Humana Bennett. The petition was denied in a final order of the Department without referral to the Division of Administrative Hearings for

      the assignment of a hearing officer or other proceedings;

   2. a notice of appeal to the District Court of Appeal, First District;

   3. a consolidated initial brief for both cases BD-46 (challenging the Humana Bennett certificate of need) and BD-45 (challenging the University certificate ofneed);

   4. a consolidated reply brief in both cases.

3. The following papers also were filed by Mr. Tilton in case 50-46:

   1. motion for expedited review;

   2. petition for stay;

   3. reply to response to petition for stay;

   4. request for oral argument;

   5. motion to consolidate;

   6. response to motion to transfer to Fourth District Court of Appeal;

   7. response to notion to supplement record;

   8. response to motion for judicial notice;

   9. motion to strike portion brief of HRS;

   10. motion to strike answer brief of Humana Bennett;

   11. motion to strike amended answer brief of University;

   12. response to motion to correct record;

   13. response to Humana's motion to consolidate;

   14. motion for attorney's fees;

   15. motion for rehearing;

   16. response to Humana Bennett's motion for rehearing.

       
       

4. The record on appeal before the Court of Appeals in Case BD-46 was quite brief, consisting of a petition for a hearing, a final order denying a hearing and a notice of appeal, which total 16 pages.

   
   

5. The criteria found in Chapter 4 of the Rules Regulating The Florida Bar, Rule 4-1.5(B)(1)-(8) and (C) govern the determination of a reasonable fee. These are the criteria which had been contained in the former Code of Professional Responsibility, and applied by the Supreme Court of Florida in Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145, 1150 and n.6 (Fla. 1985) when the Court adopted the lodestar approach for fee determinations developed by the federal courts.

   Time and Labor Required, Novelty and Difficulty of Questions and Skill Requisite

   to Perform Legal Service Properly. Rule 4-1.5(B)(1)

   
   

6. Mr. Tilton and his associate, Mr. Stahl, devoted 219.15 and 142.3 hours to this litigation, respectively. These hours were included in billings sent to the client, which were paid as presented without protest. The first step in determining a reasonable fee is to find the number of hours reasonably expended on the litigation. Rowe, supra, 472 So.2d 1150. The United States Supreme Court held in Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), when assessing attorney's fees in civil rights litigation under identical ethical principles that

   
   

   [t]he most useful starting point for deter- mining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. This calculation provides an objective basis on which to make an initial estimate of value of a lawyer's services.

   461 U.S. at 433, 103 S.Ct. at 1939.

   
   

7. The Department of Health and Rehabilitative Services has not argued that any of the hours claimed were not reasonably expended on the litigation, in the sense of being the product of inaccurate or questionably reconstructed time records. The records were contemporaneously kept. Neither is there evidence of over staffing e.g., that more than one attorney attended or participated in oral argument without proof that such multiple representation was necessary.

   
   

8. The appeal was not simply one in which the appellant argued that, as a competitor, it was entitled to a hearing as a matter of law. After initially indicating an intention to deny additional beds to both applicants, a hearing had been conducted which resulted in a Hearing Officer's recommendation that both 1931 applications be denied and the Department had entered a final order to that effect. Florida Medical Center's attorneys canvassed the entire record of the administrative proceeding on the 1981 applications of Humana Bennett and University to see whether there was any basis in it for the Department's abrupt change of position. Granting Humana Bennett and University new beds to settle the appeals in the Fourth District Court of Appeal was a fundamental shift in Department policy. The time spent in reviewing that record while preparing Florida Medical Center's appellate filings was appropriate.

   
   

9. The time devoted to research on Florida, federal and other states' law on the authority of an agency to abandon a position taken after the conclusion of formal proceedings in order to settle an appeal from the agency's final action, while also refusing to allow others to challenge the agency's new and directly contrary position, was reasonable. Of course, "[a] lawyer in private practice ethically is obligated to exclude [excessive, redundant, or otherwise unnecessary] hours from his fee submission . . . . Hours that are not properly billed to one's client also are not properly billed to one's adversary . . . Nestle v. Eckerhart, 461 U.S. at 434, 103 S.Ct. at 1940, quoting, Copeland v. Marshall 205 U.S.App.D.C. 390, 401, 641 F.2d 880, 891 (1980) (en banc) (emphasis by the Court). There has been no suggestion that the bills submitted to Florida Medical Center were not the product of a proper exercise of billing judgment. Payment of the bills as presented also betokens the reasonableness of the hours claimed. Complaint or objection by the client to the hours billed would suggest

   that the hours expended may have been excessive. The evidence that Mr. Tilton expended 219.15 hours and Mr. Stahl 142.3 hours on the case is accepted.

   
   

   The Fee Customarily Charged iii the Locality for Similar Legal Services. Rule 4-1.5(B)(3).

   
   

10. Much of the case law concerning a reasonable hourly rate has grown up in civil rights litigation where determining a reasonable hourly rate requires after-the-fact construction. When the services were rendered in those cases, the lawyer was not working for the client at an agreed hourly rate. A survey of hourly rates paid by clients seeking legal services on an hourly basis becomes a proxy for reasonable hourly compensation for the fee claimant's lawyer. Blum v. Stenson, 465 U.S. 886, 895 & n.11, 104 S.Ct. 1541, 1547 & n.11, 79 L.Ed.2d 891 (1984). Here, in an arms-length transaction, Florida Medical Center paid Mr. Tilton $150 per hour and Mr. Stahl $100 per hour. The $100 hourly rate for Mr. Stahl may be at the upper end of the market for attorneys admitted to the bar in 1982, but he had experience in health care law as a law clerk before admission to the bar which should be considered. These hourly rates are paid by other clients to these lawyers. Free market transactions are powerful evidence of what a reasonable hourly rate is. For lawyers of the experience of Mr. Tilton and Mr. Stahl, the rates claimed are reasonable. No persuasive evidence has been presented that these rates are exorbitant, or are out of line with a prevailing market rate for other private counsel of comparable experience, skill and reputation.

11. Based on these calculations the lodestar amount is: HOURS HOURLY

    RATE

    Tilton 219.15 x $150.00 = $32,872.50 Stahl 142.3 x $100.00 = $14,230.00

    $47,102.50 TOTAL FEE

    
    

    Results Obtained.

    Rule 4-1.5(B)(4).

    
    

12. The Department of Health and Rehabilitative Services objects to paying for all hours billed. A major issue raised by Florida Medical Center in its appellate brief was that after having entered a final order denying Humana Bennett's 1981 application for additional beds (the subject of the appeal in the Fourth District Court of Appeal), the Department could not recede from or modify that order as part of a settlement. This argument was rejected by the First District Court of Appeal, and the Department believes the lodestar amount should be reduced to recognize Florida Medical Center's limited appellate success. The short answer to this objection is that the District Court of Appeal certainly knew this, but did not specifically condition the attorney's fee award on some segregation of the amount of work devoted to different issues on the appeal.

    The Court did condition its order granting attorney's fees upon proof that Florida Medical Center had not waived its point of entry; it also could have limited the fee award to the standing issue on which Florida Medical Center prevailed, but it did not. Florida Medical Center met the only condition the Court imposed and is entitled to fees for all services rendered by its attorneys.

    
    

13. If the issue whether fees should be reduced for incomplete appellate success is open, it would be inappropriate to reduce the number of compensable

    hours here. The erroneous decision of the Department denying a hearing caused Florida Medical Center to incur appellate fees. The issue of the authority of an agency to recede from a final order in a settlement was one of first impression in Florida law. Although unsuccessful, the argument advanced in the appellate court was reasonable. To be made whole, Florida Medical Center should be reimbursed for hours attributable to that issue. If a party brings unrelated claims which carry attorney's fees to federal court and fails to prevail on all claims, fees are not granted for the unsuccessful claims. The focus, however, is on whether the partially successful party pursued "distinctly different claims for relief that are based on different facts and legal theories".

    Hensley v. Eckerhart, 461 U.S. at 434, 103 S.Ct. 1940. Here, the relief sought was reversal of the order denying Florida Medical Center the right to participate in the Department's decision to grant additional beds to Humana Bennett. That same relief was available on either theory proposed by Florida Medical Center: that its status as a competitor of Humana Bennett conferred standing as a matter of law under Section 381.494(6)(c), Florida Statutes, or that HRS was not entitled to rescind through settlement a final order denying Humana Bennett additional beds after denial had been recommended by a Hearing Officer following a Chapter 120 formal proceeding in which the applicant, competitors and the Department had been heard, and HRS had adopted that order as its final agency action. Florida Medical Center did not advance distinctly different claims for relief based on different facts and legal theories; it presented a single claim for relief based on alternate theories. Cf., Taylor v. Sterrett, 640 F.2d 663, 669 (5th Cir. 1981) ("[T]he proper focus is whether the plaintiff has been successful on the central issue as exhibited by the fact that he has acquired the primary relief sought.") As the Supreme Court said in Hensley, "The result is what matters." id., 461 U.S. at 435, 1030 S.Ct. at 1940. As the result of its appeal Florida Medical Center has participated in a lengthy Section 120.57 formal proceeding on remand which has permitted it to oppose the addition of 53 beds to a competitor. The potential competitive impact on Florida Medical Center of the opening of those new beds is sufficiently serious to make the hours reasonably expended a satisfactory basis for the fee award.

    That the record on appeal was brief, and the consolidated initial and reply briefs succinct (totaling 23 pages) does not mean the hours expended on the appeal are not properly compensable.

    
    

    Other Factors

    
    

14. None of the other factors in Rule 4-1.5(B) would vary the lodestar amount. "When . . . the applicant for a fee has carried his burden of showing that the claimed rate and number of hours are reasonable, the resulting product is presumed to be the reasonable fee to which counsel is entitled." Pennsylvania v. Deleware Valley Citizens Council, U.S. , 106 S.Ct. 3088, 3398 (1986) quoting, Blum v. Stenson, 465 U.S. 886, 897, 104 S.Ct. 1541,

    1548, 79 L.Ed.2d 891 (1984) (emphasis by the Court). The fee is not contingent, and no special time limitations were imposed by the client or the circumstances, Rule 4-1.5(B)(8), (5). The nature and length of the professional relationship with the client is not significant here since that factor is encompassed in the determination of the hourly rate to which Florida Medical Center and its attorneys agreed, as is the factor on experience, reputation and ability of the lawyer performing the services. Rule 4-1.5(B)(6), (7).

    
    

    Equal Access to Justice Act

    
    

15. The argument of the Department of Health and Rehabilitative Services that the $15,000 cap on fees which may be awarded under the Equal Access to Justice Act, Section 57.111, Florida Statutes, should be applied to this case is

    rejected. The fees the District Court of Appeal ordered HRS to pay were not awarded pursuant to that Act. That cap is permissible because an award of fees is in derogation of the American rule that a party shall bear its own fees.

    See, e.g., Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Having statutorily created the entitlement to fees, the legislature may also cap those fees. The record shows that Florida Medical Center's motion to the Court which prompted this fee award was one based on Section 120.57(1)(b)(9), Florida Statutes (1985), which authorizes the courts to award "reasonable attorney's fees and costs" without any cap. The purpose of the award is to make Florida Medical Center whole for the fees and costs incurred as the result of Departmental action which was a gross abuse of agency discretion." Section 120.57(1)(b)(9), Florida Statutes (1985). The fee will not go to Florida Medical Center's attorneys--they have already been paid. As the statute prescribes, the court has awarded the fee to "the prevailing party." It is no defense to an award under the statute that the hourly rate assessed is more than the agency pays to counsel it hires. The argument advanced by the expert witness for the Department that the focus should not be on the amount the private client was willing to pay, but on what the public will approve is not accepted. The statutory standard is that the fee shall be reasonable, and the provisions of the Rules Regulating The Florida Bar identify factors for applying the test of reasonableness. Public antipathy to awards made to private parties with public funds to redress grossly abusive agency conduct lacks legal significance.

    
    

    Costs

    
    

16. Florida Medical Center is entitled to recover the $50.00 filing fee for Case No. BD-46, the cost of the record on appeal of $4.00, and $63.74 for printing of the reply brief. The total allowable costs are $117.74.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED that fees in the amount of

$47,102.50 be awarded with costs of $117.74.

DONE AND ORDERED this 7th day of April 1987, in Tallahassee, Florida.

WILLIAM R. DORSEY, JR.

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 7th day of April 1987.

COPIES FURNISHED:

Eric B. Tilton, Esquire Post Office Drawer 550 Tallahassee, Florida 32302

R. S. Power, Esquire Agency Clerk

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Gregory L. Coler, Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Raymond E. Rhodes, Clerk District Court of Appeal

First District State of Florida

Tallahassee, Florida 32399-1850

Docket for Case No: 86-002414F

Orders for Case No: 86-002414F