STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SOUTH BEACH PHARMACY, INC., )

d/b/a SOUTHPOINTE PHARMACY, )

)

Petitioner, )

)

vs. ) CASE NO. 92-3321F

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on September 28, 1992, in Tallahassee, Florida.

APPEARANCES

For Petitioner: William M. Furlow, Esquire

Katz, Kutter, Haigler, Alderman, Davis, Marks & Rutledge

Post Office Box 1877 Tallahassee, Florida 32302-1877

For Respondent: Mark Henderson, Esquire

Department of Health and Rehabilitative Services

1317 Winewood Boulevard

Building 6, Room 233

Tallahassee, Florida 32399-0700 STATEMENT OF THE ISSUE

Whether Southpointe Pharmacy is entitled to its costs and attorney's fees from the Department of Health and Rehabilitative Services, pursuant to Section 57.111, Florida Statutes (the "Equal Access to Justice Act"), and Rule 60Q- 2.035, Florida Administrative Code.

PRELIMINARY STATEMENT

Petitioner, Southpointe Pharmacy (Southpointe), was the Respondent in an administrative proceeding brought against it by the Department of Health and Rehabilitative Services (DHRS) in which it was alleged that Southpointe had been overpaid under the Medicaid program. That dispute was referred to the Florida Division of Administrative Hearings (DOAH) and was assigned DOAH Case No. 89- 6057. Following a formal administrative hearing, the undersigned Hearing Officer entered a Recommended Order on November 15, 1990, which contained findings of fact and conclusions of law. The Recommended Order concluded, among

other things, that DHRS had failed to prove that Southpointe had been overpaid. DHRS thereafter rendered its Final Order on January 16, 1991, which rejected the material findings of fact and conclusions of law of the undersigned, determined that there had been an overpayment to Southpointe, demanded repayment of the alleged overpayment, imposed an administrative fine in the amount of $250.00, and suspended Southpointe as a Medicaid provider for three months.

Southpointe appealed the DHRS Final Order to the First District Court of Appeal. The decision of the Court, dated March 11, 1992, ordered DHRS to enter a new Final Order adopting the material findings of fact and conclusions of law contained in the Recommended Order submitted by the undersigned in Case 89-6057. The Mandate was issued by the First District Court of Appeal on April 13, 1992.

Southpointe filed its Petition for Costs and Fees (Petition), the subject of this proceeding, on June 1, 1992. DHRS thereafter moved to dismiss the Petition on the grounds that it was not filed within sixty days of Southpointe having become a prevailing party as required by Section 57.111(4)(b), Florida Statutes. The motion to dismiss was denied by the undersigned because the Petition was filed within sixty days of the entry of the mandate by the appellate court.

In response to the Petition, DHRS admitted that Petitioner was a "prevailing party" within the meaning of the statute and accepted the reasonableness of Southpointe's cost and attorneys fees to the extent of

$15,000.00. The only issue for determination at the formal hearing was whether DHRS was substantially justified in proceeding against Southpointe in DOAH Case Number 89-6057.

Prior to the formal hearing on September 28, 1992, the parties verbally stipulated to several facts, including the fact that Southpointe was a "small business party" as that term is defined by Section 57.111(3)(d), Florida Statutes. When Petitioner's attorney recited for the record the stipulation that had been reached by the parties, no mention was made of that stipulated fact. Notwithstanding its stipulation, Respondent argued in its post-hearing submittal that the petition should be denied because Petitioner had failed to prove that it was a small business. Thereafter, Petitioner moved to reopen the record to permit it to submit evidence that it met the definition of a small business. (Petitioner had also moved prior to hearing to have that fact deemed admitted due to Respondent's failure to timely respond to discovery. Because of the verbal stipulation, Petitioner did not seek a ruling on its motion.) During the course of the hearing on the motion to reopen the record, counsel for Respondent conceded that the parties had, prior to the formal hearing, stipulated that Southpointe met the statutory definition of a small business party. To avoid a miscarriage of justice, the undersigned ordered the record reopened for the limited purpose of taking evidence as to whether Petitioner met the statutory definition of a small business party. See, Rule 60Q-2.024, Florida Administrative Code. Thereafter, the parties submitted a written stipulation that reflects their verbal stipulation and Respondent reserved the right to appeal the decision to reopen the record. Consequently, whether Petitioner is a small business party is not at issue.

A transcript of the proceedings has been filed. Rulings on the parties' proposed findings of fact may be found in the Appendix to this Final Order.

FINDINGS OF FACT

1. Petitioner, South Beach Pharmacy, Inc., d/b/a Southpointe Pharmacy (Southpointe), was at all times material hereto, a pharmacy located in Dade County, Florida, and a provider under the Medicaid program.

   
   

2. Respondent, Department of Health and Rehabilitative Services (DHRS), was and is the state agency responsible for regulating the Medicaid program in Florida. Pharmacies participating in the Medicaid program are subject to routine audits, which are coordinated by the DHRS Office of Program Integrity.

   
   

3. In early 1989 a routine audit of Southpointe was conducted by the Professional Foundation for Health Care (PFHC) at the request of DHRS. Following that audit, DHRS reasonably determined that further investigation was warranted and asked PFHC to perform an audit referred to as an "aggregate analysis." PFHC performed the aggregate analysis audit as instructed and

   determined that an overpayment had been made to Southpointe. The PFHC audit was submitted to and reviewed for accuracy and correctness by the Office of Program Integrity. In August 1989, DHRS took proposed final agency action against Southpointe in the form of a letter which, among other things, demanded repayment of funds alleged to have been overpaid under the Medicaid program, assessed an administrative fine against Southpointe, and terminated Southpointe from the Medicaid program for two years. That letter was revised in September 1989 to change the amount of the alleged overpayment. The alleged overpayment was challenged by Southpointe. The matter was submitted to the Division of Administrative Hearings and assigned DOAH Case No. 89-6057.

   
   

4. At the times pertinent to this proceeding DHRS had not adopted the "aggregate analysis" methodology by rule. Instead, DHRS relied on incipient, non-rule policy and attempted, without success, to explicate its reasons for relying on this methodology. The first time the "aggregate analysis" methodology was used in an effort to determine the overpayment by Medicaid to a pharmacy was in the case of David's Pharmacy v. Department of Health and Rehabilitative Services, DOAH Case No. 88-1668 (Final Order entered September 15, 1988). The Final Order entered in the David's Pharmacy case specifically recognized that DHRS was not entitled to rely on non-rule policy in imposing sanctions against a provider because of the wording of Section 409.266(11)(g), Florida Statutes (1989), which limits the imposition of sanctions against a Medicaid provider to situations where the provider is not in compliance with the Florida Administrative Code. Further, the Final Order in the David's Pharmacy case concluded that the aggregate analysis methodology was flawed and, consequently, could not be relied upon by DHRS in determining that an overpayment had been made.

   
   

5. Although DHRS again attempted to rely on the aggregate analysis methodology in the audit of Southpointe, DHRS had not adopted the aggregate analysis methodology as a rule (even though there were no changes in the governing statute) and it did not cure all the defects in the methodology that were specifically raised by the Final Order in David's Pharmacy. The only material change in the aggregate analysis procedure between the time of the David's Pharmacy final order and the time it was used to audit Southpointe was the elimination of the use of a Medicaid percentage applied to the quantities of audited drugs.

   
   

6. The Recommended Order submitted by the undersigned following the formal hearing in the underlying proceeding (DOAH Case No. 89-6057) found that DHRS had not adopted the "aggregate analysis" methodology as a rule and that DHRS had not

   explicated its policy in attempting to rely on this non-rule policy. The Recommended Order concluded that DHRS had failed to prove any overpayment to Southpointe. The Recommended Order also found that certain data relied on by PFHC in performing the aggregate analysis was unreliable, which resulted in the amount of claimed overpayment being overstated. While DHRS was not aware that this data was unreliable, this data merely affected the amount of the overpayment. It was DHRS's continued reliance on the aggregate analysis that led DHRS to the assertion that there had been an overpayment.

   
   

7. DHRS, by its Final Order in DOAH Case No. 89-6057, rejected many of the facts and the conclusion contained in the Recommended Order. Instead, DHRS determined that there had been an overpayment to Southpointe, demanded repayment of the alleged overpayment, imposed an administrative fine in the amount of

   $250.00, and suspended Southpointe as a Medicaid provider for three months. Thereafter, Southpointe appealed DHRS's Final Order to the First District Court of Appeal. The First District Court of Appeal reversed DHRS and concluded, in pertinent part, as follows:

   
   

   . . . Therefore, as found by the hearing officer, the Department was proceeding not under any existing rule but rather under incipient policy. That finding was based upon competent and substantial evidence, and

   we hold it was a gross abuse of discretion for the Department to reject that finding of fact.

   * * *

   . . . [W]e agree with the hearing officer that HRS failed in its mission to support and defend the aggregate analysis with competent and substantial evidence. In an earlier final order issued by the Department, David's Pharmacy v. Department of Health and Rehabilitative Services, 11 FALR 2935 (HRS 1988), wherein aggregate analysis was utilized for the first time, the Department found HRS had not appropriately explicated this non-rule policy by its failing to produce evidence that would establish a rational, reasonable basis for the procedure.

   In the instant case, despite rather pat testimony to the effect that the aggregate analysis is indeed contemplated by the rule, it was shown that HRS had not checked a single Medicaid patient to determine if the medication had been dispensed, or a single physician to see if the medication had been prescribed. Robert Peirce testified that the only thing HRS had done since David's Pharmacy, was to delete the requirement of utilizing a "percentage of Medicaid sales" from the formula. As pointed out by Southpointe, none of the other shortcomings

   of aggregate analysis which were identified in the David's final order were remedied by HRS at the hearing below. For example, neither a beginning nor ending inventory had been taken into consideration, and no

   consideration was given to whether Southpointe had acquired additional drugs to augment its inventory by means other than direct purchase from its

   manufacturers 1/

   
   

8. DHRS has failed to establish that it was substantially justified in taking action against Southpointe based on the aggregate analysis methodology. There was no evidence to show that an award of fees and costs to Southpointe would be unjust in this case.

   
   

9. Southpointe has become obligated to pay costs and attorney's fees in excess of $15,000.00, the maximum allowable recovery under the Equal Access to Justice Act. The parties stipulated that these costs and fees are reasonable. Petitioner is a prevailing small business within the meaning of Section 57.111, Florida Statutes, and has met all conditions precedent for such an award.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction over this matter. Section 120.57(1), Florida Statutes.

    
    

11. Section 57.111, Florida Statutes, known as the Equal Access to Justice Act, provides for the award of attorney's fees and costs, not to exceed

    $15,000.00, to a "prevailing small business party" where a state agency, such as DHRS, has initiated an action against the small business party. Pursuant to Section 57.111(4)(a), Florida Statutes, the award is not to be made if the actions of the agency were "substantially justified" or "special circumstances exist which would make the award unjust."

    
    

12. Section 57.111(3)(d), Florida Statutes, defines the term "small business party". The parties stipulated that Petitioner meets that statutory definition.

    
    

13. Section 57.111(3)(e), Florida Statutes, provides as follows:

    
    

    (e) A proceeding is "substantially justified" if it had a reasonable basis in law and fact at the time it was initiated by a state agency.

    
    

14. DHRS was aware that PFHC relied on the aggregate analysis methodology in determining that there had been an overpayment to Southpointe, and it was aware that the aggregate analysis methodology was flawed. In this proceeding, DHRS failed to establish that it was "substantially justified" in asserting that Southpointe had been overpaid when that assertion was based on flawed methodology. This conclusion is all the more compelling because of the final order entered by DHRS in the David's Pharmacy case. There was no evidence that "special circumstances exist which would make the award unjust", as that phrase is used by Section 57.111(4)(a), Florida Statutes.

    
    

15. Southpointe has established that it has met all criteria for the award of fees and costs pursuant to Section 57.111, Florida Statutes.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the petition for fees and costs filed by Southpointe be, and

the same hereby is, GRANTED, in the amount of $15,000.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 1st day of December 1992.

CLAUDE B. ARRINGTON

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 1st day of December 1992.

ENDNOTE

1/ Southpointe Pharmacy v. Department of Health and Rehabilitative Services, 596 So.2d 106, 111 (Fla. 1st DCA 1992).

APPENDIX TO THE FINAL ORDER IN CASE 92-3321F

The following rulings are made on the proposed findings of fact submitted on behalf of the Petitioner.

1. The proposed findings of fact in paragraphs 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 14, 15, and 16 are adopted in material part by the Recommended Order.

2. The proposed findings of fact in paragraph 7 are adopted in material part by the Recommended Order, with the exception of the proposed findings of fact contained in the second sentence, which are subordinate to the findings made.

3. The proposed findings of fact in paragraph 12 are rejected as being unnecessary to the conclusions reached.

4. The proposed findings of fact in paragraph 13 are rejected as being unnecessary to the conclusions reached since it was found that DHRS, the party with the burden of proof, failed to establish that the aggregate analysis methodology was a valid or accurate methodology.

The following rulings are made on the proposed findings of fact submitted on behalf of the Respondent.

1. The proposed findings of fact in paragraphs 1, 10, 11, 12, 13, 14, and

   16 are adopted in material part by the Recommended Order.

2. The proposed findings of fact in paragraphs 2, 3, 4, 5, 6, 7, 8, and 9 are rejected as being subordinate to the findings that DHRS reasonably determined that further investigation was warranted.

3. The proposed findings of fact in paragraph 15 are rejected as being unsubstantiated by the evidence. The flawed data used by PFHC overstated the amount of the alleged overpayment, but the fact that there was an overpayment resulted from reliance on the flawed aggregate analysis methodology.

4. The proposed findings of fact in paragraph 17 are rejected as being contrary to the stipulation of the parties.

COPIES FURNISHED:

William M. Furlow, Esquire

Katz, Kutter, Haigler, Alderman, Davis, Marks & Rutledge

Post Office Box 1877 Tallahassee, Florida 32302-1877

Mark Henderson, Esquire Department of Health and

Rehabilitative Services 1317 Winewood Boulevard

Building 6, Room 233

Tallahassee, Florida 32399-0700

Robert Powell, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

John Slye, Esquire General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68. FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

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DISTRICT COURT OPINION

=================================================================

IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA

STATE, DEPARTMENT OF HEALTH NOT FINAL UNTIL TIME EXPIRES TO AND REHABILITATIVE SERVICES, FILE MOTION FOR REHEARING AND

DISPOSITION THEREOF IF FILED.

Appellant,

CASE NO. 92-4332

v. DOAH CASE NO. 92-3321F

SOUTH BEACH PHARMACY, INC., d/b/a SOUTHPOINTE PHARMACY,

Appellee.

/ Opinion filed April 12, 1994.

An appeal from the Division of Administrative Hearings. Claude B. Arrington, Hearing Officer.

David G. Pius, Senior Attorney, Department of Health and Rehabilitative Services, Tallahassee, for Appellant.

William M. Furlow and Alan Harrison Brents of Katz, Kutter, Haigler, Alderman, Davis, Marks & Bryant, P.A., Tallahassee, for Appellee.

BENTON, J.

The Department of Health and Rehabilitative Services (HRS) urges reversal of a hearing officer's final order requiring HRS to reimburse South Beach Pharmacy, Inc. (Southpointe) for attorney's fees and costs that Southpointe incurred in successfully defending HRS's claims against it. HRS maintains that the fee petition was filed out of time, and argues that the hearing officer erred in finding that HRS lacked substantial justification to initiate the main case. We reject both contentions and affirm.

In proceedings under the Florida Equal Access to Justice Act (Act), section 57.111, Florida Statutes, small business parties who have prevailed in civil actions 1/ or administrative proceedings initiated by a state agency are entitled to recover attorney's fees and costs (up to a statutory limit), "unless the actions of the agency were substantially justified or special circumstances exist which would make the award unjust." s. 57.111(4)(a), Fla. Stat. (1993)

Time for Filing Limited

In order to recover when the predicate proceeding is administrative, 2/ a small business party must initiate a separate administrative proceeding, by

filing a petition with the Division of Administrative Hearings in conformity with Florida Administrative Code Rule 60Q-2.035, "within 60 days after the date that the small business party becomes a prevailing small business party." s.

57.111(4)(b)2., Fla. Stat. (1993).

In its final order in the main or underlying case, HRS fined Southpointe, suspended Southpointe from the Medicaid program, and ordered a refund of claimed overpayments. Only after it succeeded in overturning HRS' final order on appeal, Southpointe Pharmacy v. Department of Health and Rehabilitative Services, 596 So. 2d 106 (Fla. 1st DCA 1992), could Southpointe be said to have prevailed. (Although the hearing officer's recommended order in the main case was favorable, HRS entered a final order in that case adverse to Southpointe "reject[ing] in part certain findings of fact made by the hearing officer, as well as the hearing officer's conclusions of law drawn therefrom." 596 So. 2d at 107.)

Where a lower tribunal enters a favorable final order or judgment in the first instance and an appeal is taken, 3/ section 57.111(3)(c), Florida Statutes (1993), does not treat the small business party as having prevailed, while the appeal is pending. Otherwise, absent a stay, a small business party could recover fees and costs before the ultimate outcome was clear. If a favorable judgment or order is reversed, section 57.111, Florida Statutes (1993), authorizes no award. During the pendency of the appeal, the favorable "judgment or order has not [yet] been reversed on appeal," but it is not clear whether it will eventually be reversed, 4/ and "the time for seeking judicial review of the judgment or order has" not expired, within the meaning of the statute.

Adverse Order Reversed

Here, of course, HRS' original order was unfavorable. Our decision in Southpointe Pharmacy v. Department of Health and Rehabilitative Services, 596 So. 2d 106 (Fla. 1st DCA 1992), reversing HRS' final order in the main case, was filed on March 11, 1992. Even though no petition for rehearing, clarification or certification had been filed in the interim, the mandate did not issue until April 13, 1992. In its amended initial brief, HRS asserts that

Southpointe became the prevailing party on March 27, 1992, when "the time for judicial review of the judgment or order [had] expired." s. 57.111[3](c)1, Florida Statutes.

. . . The only remaining action was the issuance of a mandate by the [appellate] clerk . . . . [which] is clearly a ministerial act by the [appellate] court's clerk . . . .

Citing Florida Rule of Appellate Procedure 9.340, 5/ HRS goes on to argue that Southpointe's section 57.111 petition was untimely because it was not filed with the clerk of the Division of Administrative Hearings until June 1, 1992, more than sixty days after the mandate "should have issued," albeit within sixty days of its actual issuance.

We view the significance of the mandate in a very different light, and do not, in any event, believe it is incumbent on a prevailing small business party to second guess an appellate court as to the proper time for its issuance.

Florida Rule of Appellate Procedure 9.340 prescribes the time for issuance of

the mandate "[u]nless otherwise ordered." It is within the discretion of an appellate court when a mandate issues, Jacksonville, T. & K. W. Ry. Co. v.

Adams, 28 Fla. 631, 10 So. 465 (1898), although this discretion must be exercised, if not earlier, then "during the 15-day mandate period." City of Miami v. Arosteui, 616 So. 2d 1117, 1119 (Fla. 1st DCA 1993) (citing State ex rel. Price v. McCord, 380 So. 2d 1037 (Fla. 1980)). "The power of the court to expedite as well as delay the issuance of the mandate, with or without motion, has been made express." Committee Notes, 1977 Amendment, Fla. R. App. P. 9.340. Only upon issuance of the mandate does the appellate court's decision become final. State ex rel. Davis v. Clearwater, 108 Fla. 635, 146 So. 836 (1933).

But the favorable judgment or order section 57.111 makes prerequisite to an award of fees and costs is not the judgment or order of an appellate court. The statute contemplates the judgment or order of a trial court or, as here, the final order of an administrative agency. Section 57.111(3)(c), Florida Statutes (1993), provides:

A small business party is a "prevailing small business party" when:

1. A final judgment or order has been entered in favor of the small business party and such judgment or order has not been reversed on appeal or the time for seeking judicial review of the judgment or order has expired;

The favorable "final judgment or order" is the judgment or final order of the lower tribunal, whether never appealed, affirmed on appeal, or entered pursuant to mandate, after an appeal has concluded. In the event of an appeal, the lower tribunal is without jurisdiction until the appeals court's mandate issues. See McGurn v. Scott, 596 So. 2d 1042, 1045 (Fla. 1992) (citing Willey v. W. J. Hoggson Corp., 89 Fla. 446, 105 So. 126 (Fla. 1925))

Favorable Order Imputed

HRS had a duty in the main proceeding to enter an order favorable to Southpointe in accordance with the mandate, once the original final order adverse to Southpointe was reversed; as soon as the mandate issued, HRS had jurisdiction to act. "When the mandate was received by . . . [HRS, it] should have carried out and placed into effect the order and judgment of this [c]ourt." Blackhawk Heating & Plumbing Co., Inc. v. Data Lease Financial Corp., 328 So. 2d 825, 827 (Fla. 1975) (citation omitted). An administrative agency "is without authority to alter or evade the mandate of an appellate court absent permission to do so," 328 So. 2d at 827 (citation omitted), permission HRS did not have here.

The original, adverse order nevertheless remains the only final order HRS has ever entered in the main case. HRS did not enter an order on remand dismissing with prejudice. But HRS' omission cannot be allowed to defeat Southpointe's right to recover fees and costs. "[I]n the absence of an order in the main case on remand, an order in conformity with the mandate must be imputed, if necessary to prevent [an agency's] taking unfair advantage by withholding what an appellate court has clearly required." Sun Coast International, Inc. v. Department of Business Regulation, No. 92-3576F (DOAH Nov. 13, 1992). See Robbins v. Pfeiffer, 407 So. 2d 1016 (Fla. 5th DCA 1981) (compliance with mandate "is a purely ministerial act" At 1017).

Southpointe's petition for fees and costs was timely, and HRS' failure to enter a favorable final order on remand, when the reviewing court mandated reversal, is no bar to proceedings under section 57.111, Florida Statutes (1993). Settlement or voluntary dismissal aside, the sixty-day period in which section 57.111(4)(b)2, Florida Statutes (1993), contemplates that a small business party will file its fee petition does not begin before entry of a favorable order or judgment. Here the time never began running, because HRS never entered an order on the mandate. 6/ But Southpointe's fee petition was in no sense premature, because a small business party has the right to insist that an order conforming to the mandate be imputed, at any time after the mandate issues.

Substantial Justification Not Proven

"The Act is designed to discourage unreasonable governmental action, not to paralyze agencies doing the necessary and beneficial work of government."

Rudloe v. Department of Environmental Regulation, 33 Fla. Supp. 2d 203 (DOAH 1987). But, once a prevailing small business party proves that it qualifies as such under section 57.111, the agency that initiated the main or underlying proceeding has the burden to show substantial justification or special circumstances, Department of Health and Rehabilitative Services v. S.G., 613 So. 2d 1380, 1386-7 (Fla. 1st DCA 1993); Department of Professional Regulation, Div. of Real Estate v. Toledo Realty, Inc., 549 So. 2d 715 (Fla. 1st DCA 1989); Ray

v. Department of Transportation, 9 F.A.L.R. 1537 (DOAH 1990); Gentele v. Department of Professional Regulation, 9 F.A.L.R. 310 (DOAH 1986) aff'd 513 So. 2d 672 (Fla. 1st DCA), in order to avoid liability for fees and costs.

HRS initiated the original, unsuccessful administrative proceeding at issue here, seeking to recover a refund of Medicaid reimbursement payments, after an audit conducted by an independent contractor, at HRS' instance. But HRS' duty to initiate administrative proceedings only when it has substantial justification to do so is non-delegable; and in no way attenuated by contracting for auditing or other investigative services, instead of relying on auditors and investigators on its own payroll.

As if foreshadowing the hearing officer's findings and conclusions in the present case, we observed, when we reversed HRS' order in the underlying case, Southpointe Pharmacy v. Department of Health and Rehabilitative Services, 596 So. 2d 106 (Fla. 1st DCA 1992):

. . . HRS had not checked a single Medicaid patient to determine if the medication had been dispensed, or a single physician to see if the medication had been prescribed. . . .

[T]he only thing HRS had done to validate the aggregate analysis auditing method since David's Pharmacy [v. Department of Health and Rehabilitative Services, 11 F.A.L.R. 2935 (HRS 1988)] was to delete the requirement of utilizing a "percentage of Medicaid sales" from the formula. As pointed out by Southpointe, none of the other shortcomings of aggregate analysis which were identified in the David's final order were remedied by HRS at the hearing below. For example, neither a beginning nor ending inventory had been taken into consideration, and no

consideration was given as to whether Southpointe had acquired additional drugs to augment its inventory by means other than direct purchase from its manufacturers.

At this juncture, we are bound by the hearing officer's findings of fact in the fee case, since they are supported by competent, substantial evidence. We agree with the hearing officer's legal conclusion that HRS failed to carry its burden to demonstrate that it was substantially justified in initiating the original administrative proceeding.

AFFIRMED.

ERVIN and BARFIELD, JJ., CONCUR.

ENDNOTES

1/ The Florida Equal Access to Justice Act provides for awards of fees and costs in judicial as well as in administrative proceedings. It is designed to reimburse small businesses defending against or seeking review of "unreasonable governmental action because of the expense of civil actions and administrative proceedings." s. 57.111(2), Fla. Stat. (1993).

2/ In a civil action, the state agency is itself a mere litigant, so section

57.111 claims can be adjudicated in the same judicial proceeding the agency initiates. See Cheek v. McGowan Elec. Supply Co., 511 So. 2d 977 (Fla. 1987).

In administrative proceedings, however, the agency ordinarily has final order authority in the main case. s. 120.57, Fla. Stat. (1993). Rather than confer authority on the agency to decide its own liability for attorney's fees and costs, the Act directs that proceedings be instituted in the Division of Administrative Hearings and confers final order authority on the hearing officer.

3/ If no appeal is taken from a favorable judgment or order, the small business party is deemed prevailing after the thirty days allowed by Florida Rule of Appellate Procedure 9.110 elapse, when "time for seeking judicial review of the judgment or order has expired." s. 57.111(3)(c)1, Fla. Stat. (1993). The statute allows sixty days thereafter, s. 57.111(4)(b)2, Fla. Stat. (1993), or ninety days from the date of the favorable judgment or order never appealed.

1. v. Department of Health & Rehabilitative Services, No. 91-6285F (DOAH Feb. 20, 1992) aff'd in part, Department of Health & Rehabilitative Services v. S.G., 613 So. 2d 1380 (Fla. 1st DCA 1993); Hilgeman v. State Dep't of Business Regulation, No. 90-6668F (DOAH April 26, 1991). But see Minkes v. Department of Professional Regulation, No. 89-792F (DOAH March 8, 1989) aff'd 550 So. 2d 1175 (Fla. 3d DCA 1989).

   
   

   4/ If the favorable judgment or order is affirmed (or if the review proceedings are dismissed), the appellate court's issuance of the mandate establishes the lower tribunal's "judgment or order [as one that] has not been reversed on appeal," and definitively concludes "the time for seeking judicial review of the judgment or order." In such cases, the sixty days allowed by section 57.111(4)(b)2., Florida Statutes (1993), run from the date that the appellate court issues the mandate. See State ex rel. Price v. McCord, 380 So. 2d 1037 (Fla. 1980); Thibodeau v. Sarasota Memorial Hospital, 449 So. 2d 297 (Fla. 1st DCA 1984); Robbins v. Pfeiffer, 407 So. 2d 1016 (Fla. 5th DCA 1981).

   We are not persuaded that service of copies of the mandate on the parties is pertinent, except insofar as due process requires notice in sufficient time to act. See Berger v. Leposky, 103 So. 2d 628 (Fla. 1958) ("mandate of an appellate tribunal is, of course, directed not to the parties, but to the [lower] court" At 631.) Accord, Tierney v. Tierney, 290 So. 2d 136, 137 (Fla. 2d DCA 1974) (on reh.). But see Eager v. Florida Keys Aqueduct Authority, 605 So. 2d 883 (Fla. 3d DCA 1992).

   
   

   5/ Entitled "Mandate," Florida Rule of Appellate Procedure 9.340 provides:

   1. Issuance of Mandate. Unless otherwise ordered by the court or provided by these rules, the clerk shall issue such mandate or process as may be directed by the court after expiration of 15 days from the date of an order or decision. A copy thereof, or notice of its issuance, shall be served on all parties.

   2. Extension of Time for Issuance of Mandate. If a timely motion for rehearing, clarification, or certification has been filed, the time for issuance of a mandate or other process shall be extended until 15 days after rendition of the order denying the motion, or, if granted, until 15 days after the cause has been fully determined.

Fla. R. App. P. 9.340(a) and (b).

6/ An agency faced with reversal of an order it entered adverse to a small business party has an incentive to enter a favorable order on remand promptly, in order to start the sixty-day "clock."

DISTRICT COURT OF APPEAL, FIRST DISTRICT

Tallahassee, Florida 32399-1850

Telephone (904) 488-6151

DATE April 12, 1994

CASE NO. 92-4332 LT 92-332l-F

STATE, DEPARTMENT OF HEALTH SOUTH BEACH PHARMACY, INC., AND REHABILITATIVE SERVICES v. d/b/a SOUTHPOINTE PHARMACY

Appellant Appellee

BY ORDER OF THE COURT:

The motion by appellee for attorney's fees is granted under section 57.111, Florida Statutes (1993). This case is remanded to the trial court for determination of amount thereof if the parties are unable to agree on an amount.

I HEREBY CERTIFY that the foregoing is a true copy of the original court order.

Jon S. Wheeler, Clerk BY: Laurie Black

Deputy Clerk

copies:

David G. Pius William M. Furlow Deanna Hartford

Docket for Case No: 92-003321F

Orders for Case No: 92-003321F