STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PICKETT, FANELLI & O'TOOLE, P.A., )

)

Petitioner, )

)

vs. ) CASE NO. 96-1122F

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its designated Hearing Officer, Joyous D. Parrish, held a formal hearing in the above-styled case on May 31, 1996, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Carolyn S. Raepple, Esquire

Hopping Green Sams & Smith, P.A.

123 South Calhoun Street Post Office Box 6526 Tallahassee, Florida 32314

For Respondent: Peter S. Fleitman, Esquire

Department of Revenue

204 Carlton Building Post Office Box 6668

Tallahassee, Florida 32314-6668 STATEMENT OF THE ISSUE

The issues in this case are: whether Petitioner is entitled to attorneys' fees and costs incurred in DOAH case no. 95-3138BID pursuant to Section 57.111, Florida Statutes; and, if so, in what amount; and whether Petitioner is entitled to attorneys' and costs incurred in the instant case pursuant to Section 120.57(1)(b)5, Florida Statutes.

PRELIMINARY STATEMENT

This case is the progeny of DOAH case no. 95-3138BID, wherein Petitioner, Pickett, Fanelli & O'Toole, P.A. (PFO), was the successful challenger to the award of a legal services contract to a third party (not a party herein). In DOAH case no. 95-3138BID (the bid case), the Petitioner demonstrated that the Respondent, the Department of Revenue (Department), had acted arbitrarily in its intended award of the contract to the third party. More specifically, the bid case found that the third party's proposal did not meet the mandatory requirements of the request for proposal and, therefore, was not entitled to the contract.

The recommended order entered in DOAH case no. 95-3138BID was adopted by the Department (with one minor amendment not pertinent to the issues of this case) on December 1, 1995. Thereafter, the Petitioner filed the instant petition seeking an award of fees and costs pursuant to Section 57.111, Florida Statutes.

The petition for fees and costs alleged that PFO is a small business party which had prevailed in the bid case. Moreover, the petition claimed that the acts of the Department were not substantially justified and that there are no special circumstances which would make the award of fees and costs unjust.

Attached to the petition were: an affidavit from PFO regarding its small business status; the final order and recommended order entered in the bid case; an itemized statement of attorneys fees; the affidavit of the attorney representing Petitioner; a summary of the costs incurred in the bid case; and the affidavit of Mary Piccard, an attorney not involved in the proceeding who reviewed the Petitioner's claim for fees and costs.

In its response to the petition and the supporting documentation, the Department argued that its acts in the bid case were substantially justified. Citing Department of Professional Regulation, Division of Real Estate v. Toledo Realty, Inc., 549 So.2d 715 (Fla. 1st DCA 1989), the Department claimed that it had a reasonable basis both in law and in fact to support the award made to the third party. Consequently, it argued, the intended award was substantially justified based upon what the Department knew at the time. The Department maintained that the facts and circumstances available to it at the time of its initial determination justified the course of conduct it took.

Significantly, the response to the petition did not challenge the amount of the fees and costs claimed and did not, except in a conclusionary fashion, dispute that PFO is a small business entity. The thrust of the Department's response, therefore, was the legal argument that the Department's action was substantially justified.

Nevertheless, the Department sought, and was granted, an evidentiary hearing. The case had been scheduled for a telephone conference call. When rescheduled, the matter was set for an in person hearing at the Division of Administrative Hearings.

The Department initiated discovery in the form of interrogatories, a request to produce, and scheduling the deposition of a PFO principal. As part of its response to the discovery, the Petitioner filed for attorneys fees and costs pursuant to Section 120.57(1)(b)5, Florida Statutes, and alleged that the Department's actions in the instant case establish an improper purpose. The Petitioner maintains that the Department's tactics demonstrate the Respondent seeks to thwart the Petitioner from receiving the full benefit of the award under Section 57.111, Florida Statutes, by, in effect, escalating the cost of the instant action.

In support of its claim for fees under Section 120.57(1)(b)5, Florida Statutes, the Petitioner cited applicable rules which are more fully addressed in the conclusions of law below. In summary, the Department's response argued that it is entitled to defend the request for fees (57.111 request) and that, as such, its actions are not for a frivolous purpose.

The parties filed a prehearing stipulation on May 22, 1996. Pertinent findings of fact from that document are included below.

At the hearing, Petitioner's exhibits numbered 1 through 19 were admitted into evidence. Shirley Holmes and Brian McGrail testified on behalf of the Department. The deposition testimony of Don Pickett was also received on behalf of the Department as were the exhibits attached thereto.

The transcript of the proceeding was filed on June 24, 1996. Specific rulings on the proposed findings of fact submitted by the parties are included in the appendix at the conclusion of this order.

FINDINGS OF FACT

1. The Petitioner, PFO, is a professional corporation organized and existing under the laws of the State of Florida.

   
   

2. Petitioner's principal office is located in West Palm Beach, Florida.

   
   

3. At all times material to the claims of this case, Petitioner had fewer than 25 full-time employees.

   
   

4. At all times material to the claims of this case, Petitioner had a net worth of less than $2 million.

   
   

5. On May 22, 1995, the Department provided Petitioner with a clear point of entry to a formal administrative hearing pursuant to Section 120.53(5), Florida Statutes. At that time the Department issued an intent to award the Palm Beach County (Intrastate) CSE contract to a third party. This dispute evolved into DOAH case no. 95-3138BID or "the bid case."

   
   

6. The Department was not a "nominal party" in the bid case.

   
   

7. A recommended order was entered in the bid case on September 5, 1995.

   
   

8. Except for a minor point not relevant to the issues of this matter, the Department adopted the findings and conclusions of the recommended order and entered its final order on December 1, 1995.

   
   

9. The final order in DOAH case no. 95-3138BID awarded the Palm Beach County (Intrastate) contract for CSE legal services to Petitioner. Such award was based upon the conclusions that the third party's proposal was nonresponsive and that aspects of the evaluation process were arbitrary.

   
   

10. No appeal was timely filed against the final order. Petitioner is, therefore, a prevailing small business party within the meaning of Section 57.111, Florida Statutes.

    
    

11. The Petitioner timely filed its request for attorneys' fees and costs in the instant case pursuant to Section 57.111, Florida Statutes.

    
    

12. The total amount of attorneys' fees and costs incurred by Petitioner in the bid case was $63,495.25. Of that amount, at least $15,000 was reasonable and necessary for Petitioner to incur in the preparations for, and attendance at, the hearing in the bid case.

    
    

13. The solicitation package for the bid case contained mandatory requirements with which all applicants were to comply. The final order in the bid case concluded that the successful applicant had failed to satisfy all

    mandatory requirements. Its bid was, therefore, nonresponsive to the solicitation.

    
    

14. Additionally, the final order determined that the instructions regarding how the proposals were to be evaluated were unclear and that points were inappropriately assigned to the successful applicant.

    
    

15. The overall conclusion of the final order found that the Department had acted arbitrarily in the intended award to this third party applicant.

    
    

16. All of the material deficiencies relied on in the recommended order and the final order to reach the conclusion that the Department had acted arbitrarily were known to the Department at the time of its initial review and evaluation of the proposals.

    
    

17. For example, the Department knew that the applicant had not identified two attorneys who would be expected to perform services under the contract, and had not included certificates of good standing from the Florida Bar for them.

    
    

18. Additionally, the applicant had not provided references from three persons as specified in the solicitation package. This was evident upon the opening of the proposal.

    
    

19. Nevertheless, the Department scored the nonresponsive proposal and awarded it sufficient points to be the apparent winner among the applicants.

    
    

20. An award of attorneys fees' and costs under Section 57.111, Florida Statutes, is capped at $15,000.

    
    

21. The agency has not disputed the reasonableness nor the amount of fees claimed in connection with the bid case.

    
    

22. The agency has not offered evidence to specify each item of cost or fee in dispute.

    
    

23. Discovery requested by the Department sought information for the period September 1995 through January 1996 which included runner logs of Petitioner's counsel, itemized bills regarding another party (not a party to the bid case nor this case), and the deposition of Don Pickett.

    
    

24. None of the requested discovery addressed the issue of whether the Department's actions in the bid case were substantially justified.

    
    

25. None of the requested discovery addressed facts which the Department had placed in issue by its response to the petition.

    
    

26. None of the discovery addressed the issue of whether there are special circumstances which would make an award of reasonable fees and costs unjust.

    
    

27. Moreover, the parties have stipulated that there are no special circumstances which would make an award of reasonable fees and costs unjust.

    
    

28. No new information pertinent to the claim for fees and costs herein which was unknown to the Department as a result of the bid case proceeding was discovered from the deposition of Don Pickett.

29. No new information pertinent to the reasonableness or amount of the fees claimed was discovered from the deposition of Don Pickett or the other discovery requested.

    
    

30. The factual circumstances argued in Respondent's Proposed (sic) Recommended Order, ie. that the agency had relied on findings and conclusions from an unrelated DOAH case in connection with the review of the underlying bid case, were not set forth in the response filed by the agency in the instant case and have not been deemed credible in determining the issues of this case.

    
    

31. The proposal submitted by the third party in the bid case was nonresponsive. The Department has stipulated that the award of a contract to a nonresponsive bidder is arbitrary.

    
    

    CONCLUSIONS OF LAW

    
    

32. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

33. In this case, the Petitioner must show it is a "prevailing small business party," and that the requested fees and costs were reasonable. Once that showing has been made, the agency is liable for the requested fees, up to a statutory maximum of $15,000, unless it can show by a preponderance of the evidence that it had "a reasonable basis in law and fact" when it initiated the proceeding, or that "special circumstances" exist that would make an award unjust. Section 57.111, Florida Statutes; Department of Health & Rehab. Serv.

    v. South Beach Pharmacy, Inc., 635 So.2d 117, 121 (Fla. 1st DCA 1994); Department of Prof. Reg. v. Toledo Realty, Inc., 549 So.2d 713, 717 (Fla. 1st DCA 1989).

    
    

34. As to this claim for fees and costs pursuant to Section 57.111, Florida Statutes, Petitioner has shown it was a prevailing small business party in DOAH Case No. 95-3138BID, and that it incurred reasonable attorneys' fees and costs of at least $15,000 for preparations, motions and hearings in that proceeding.

    
    

35. As the Department was not a nominal party, the Petitioner is entitled to an award of attorneys' fees and costs pursuant to Section 57.111, Florida Statutes, unless the Department proves by a preponderance of the evidence that its actions were "substantially justified," or that "special circumstances" exist which would make an award to Petitioner unjust.

    
    

36. There are no "special circumstances" which would make an award to PFO unjust. Therefore, the only issue left to be determined is whether the Department has demonstrated by a preponderance of the evidence that it was "substantially justified" when it issued its notice of its intent on May 22, 1995. It has failed to meet that burden.

    
    

37. It is concluded that the Department has presented no credible evidence to support its argument that at the time of the intended award there was a reasonable basis in law and fact for its action. The intended award to an applicant with a nonresponsive proposal was arbitrary and not supported by fact or logic. There are no facts to support why the evaluation committee ignored the mandatory requirements of the solicitation and awarded points to a nonresponsive applicant.

38. The final order entered by the Department affirmed this conclusion, reversed the decision to award the contract to the nonresponsive applicant, and acknowledged that the award of a contract to a nonresponsive bidder is arbitrary [See also Prehearing Stipulation, p. 7, paragraph 3].

    
    

39. As to the request for fees and costs pursuant to Section 120.57(1)(b)5., Florida Statutes, that provision authorizes an award of attorneys' fees incurred because "a pleading, motion, or other paper" was interposed for "any improper purpose." The statute does not define an "improper purpose," but it provides examples "such as to harass or to cause unnecessary delay or for frivolous purpose or needless increase in the cost of litigation." Because this list is only illustrative, it is not exhaustive.

    
    

40. As used in Section 120.57(1)(b)5., Florida Statutes, a "frivolous purpose" is one of little significance or importance in the context of the proceeding. Mercedes Lighting & Elec. Supply, Inc. v. Department of Mgmt. Serv., 560 So.2d 272, 278 (Fla. 1st DCA 1990). The determination of this issue does not require the subjective good faith or bad faith of the signatory. Instead, it requires the objective reasonableness of the pleading, motion, or other paper in light of the facts and circumstances of the proceeding in which it was filed. Mercedes at 278. For this reason, the Department's work in the instant case must be reviewed in light of the purpose to be achieved by pursuing such course.

    
    

41. Pertinent to this issue are several provisions of Rule 60Q-2.035, Florida Administrative Code, which provide:

    
    

    1. The state agency [shall either admit to the reasonableness of the fees and costs] claimed [or file a counter affidavit along with its response]. The counteraffidavit shall specify each item of cost and fee in dispute.

       (5)(a) A state agency against which a petition for costs and fees has been filed [shall file a response] within twenty (20) days of filing of the petition which shall state whether the state agency seeks an evidentiary hearing and [shall specify] whether the state agency asserts:

       1. That costs and attorney's fees claimed in the affidavit are unreasonable;

       2. That the petitioner is not a prevailing small business party;

       3. That the agency's actions were substantially justified;

       4. That circumstances exist which would make the award unjust; or

       5. That the agency was a nominal party only.

          (b) When a state agency relies upon any of the grounds listed in (a), it [shall state the

          facts supporting its position with particularity].

          1. Within ten (10) days of the filing of the state agency's response, the petitioner may request an evidentiary hearing.

          2. In case of a timely request, the Hearing Officer will schedule an evidentiary hearing on reasonable notice, and may do so sua sponte in

          any event. The evidentiary hearing will take place in Tallahassee, unless the Hearing Officer orders otherwise. Unless the petitioner or the state agency timely requests one, an evidentiary hearing is waived, and the Hearing Officer will decide for or against the award and the amount, if any, on the basis of the pleadings and supporting documents, and the files and records of the Division of Administrative Hearings. [Emphasis added.]

          
          

42. In this case, the response filed by the state agency did not state any facts with particularity that contested the Petitioner's right to fees. It did not contain a counter affidavit as to the reasonableness or amount of the fees claimed, it set forth no facts to support its legal argument that the agency's actions were substantially justified, and it set forth no facts to support an argument that an award to Petitioner under the circumstances of this case would be unjust. In short, it merely made an argument, set forth at pages 4 through 8, that at the time of the intended award, the agency acted reasonably and that its actions were substantially justified.

    
    

43. Inasmuch as the amount of the fees and costs were not in dispute and that there were no factual circumstances placed at issue by the response, it is determined that the Department engaged in discovery for an improper purpose. Consequently, the Petitioner is entitled to recover fees and costs associated with the following pleadings filed by the Department: Respondent's first set of interrogatories; Respondent's motion to shorten discovery time period; Respondent's notice of request to produce; and Respondent's notice of taking deposition together with the deposition of Don Pickett.

ORDER

Based on the foregoing, it is ORDERED:

That the Petitioner is entitled to recover attorneys' fees and costs pursuant to Section 57.111, Florida Statutes, in the amount of $15,000 which the Department of Revenue shall pay within thirty days of this order; that the Petitioner is entitled to recover attorneys' fees and costs pursuant to Section 120.57(1)(b)5., Florida Statutes, as set forth in paragraph 43; and that within thirty (30) days of this order the parties shall confer and if unable to stipulate to a reasonable amount for attorneys' fees and costs, Petitioner shall file affidavits demonstrating the amount of such reasonable attorneys' fees and expenses incurred as a result of the pleadings or other papers filed for improper purposes to which the Department shall have fifteen (15) days to file counter affidavits.

DONE AND ORDERED this 14th day of August, 1996, in Tallahassee, Leon County, Florida.

JOYOUS D. PARRISH, 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 14th day of August, 1996.

APPENDIX TO FINAL ORDER, CASE NO. 96-1122F

Rulings on the proposed findings of fact submitted by the Petitioner:

1. Paragraphs 1 through 29 are accepted.

2. Paragraphs 30 and 31 are not accepted as fact; but as argument or a statement of the evidence presented.

Rulings on the proposed findings of fact submitted by the Respondent:

1. Paragraphs 1 through 4, and 8 are accepted.

2. Paragraph 5 is rejected as irrelevant.

3. Paragraph 6 is rejected as irrelevant.

4. Paragraph 7 is rejected as irrelevant. Only the information the evaluation committee knew at the time of its decision has been considered as depositive of the issue of whether the agency's action was substantially justified at the time. It knew that on its face the Thomas proposal was nonresponsive in two material ways.

5. Paragraph 9 is rejected as irrelevant.

6. Paragraph 10 is rejected as irrelevant.

7. Paragraph 11 is rejected as irrelevant.

COPIES FURNISHED:

Carolyn S. Raepple, Esquire Hopping, Green, Sams & Smith, P.A.

123 South Calhoun Street Post Office Box 6526 Tallahassee, Florida 32314

Peter S. Fleitman Assistant General Counsel Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

Larry Fuchs Executive Director

Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

Linda Lettera General Counsel

Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

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.

Docket for Case No: 96-001122F

Orders for Case No: 96-001122F