STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HHCI LIMITED PARTNERSHIP, d/b/a ) HARBORSIDE HEALTHCARE- ) PINEBROOK, d/b/a HARBORSIDE ) HEALTHCARE-SARASOTA, d/b/a ) HARBORSIDE HEALTHCARE-NAPLES, )

)

Petitioners, )

)

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

Case No. 02-1951F

)

FINAL ORDER

On October 17, 2002, a formal administrative hearing was held in Tallahassee, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative

Hearings (DOAH).

APPEARANCES

Petitioner: Donna H. Stinson, Esquire

Broad & Cassel

215 South Monroe Street, Suite 400 Post Office Box 11300

Tallahassee, Florida 32302

Respondent: Christine T. Messana, Esquire

Richard J. Saliba, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop No. 3 Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUE

Whether the Petitioners are entitled to an award of attorneys' fees and costs pursuant to Sections 120.569(2)(e) and 120.595(1), Florida Statutes, and, if so, in what amounts.

PRELIMINARY STATEMENT

This request for fees and costs arose because of separate Administrative Complaints filed by the Agency for Health Care Administration (AHCA) against HHCI Limited Partnership d/b/a Harborside Healthcare – Pinebrook, Harborside Healthcare – Sarasota, and Harborside Healthcare – Naples, (collectively HHCI). The action proposed by AHCA would have resulted in revocation of the licensure and closure of three HHCI nursing facilities pursuant to Section 400.121(3), Florida Statutes.

HHCI challenged the proposed action and requested formal hearings on the Administrative Complaints.

HHCI also challenged AHCA's authority to act on grounds that the cited statute had not taken effect until May 15, 2001, that AHCA had no authority to retroactively apply the statute, and that AHCA's policy in doing so constituted an unpromulgated rule. The rule challenge proceeding was filed on October 12, 2001, and was assigned DOAH Case No. 01-3935RU.

The Administrative Complaint cases were forwarded to DOAH on October 19, 2001, and were assigned DOAH Case Nos. 01-4124,

01-4125, and 01-4126 (subsequently consolidated under DOAH Case No. 01-4124.)

The Rule Challenge case was heard on October 23, 2001. By Final Order entered on October 31, 2001, it was held that the policy of retroactive application of the newly enacted statute was an unpromulgated rule and AHCA was directed to discontinue reliance on the policy. AHCA did not appeal the Final Order.

In a separate fee proceeding (DOAH Case No. 01-4283F) HHCI was awarded $65,607.65 in fees and costs related to the successful rule challenge. The award of fees and costs in the rule challenge case has been appealed by AHCA to the First District Court of Appeal.

On November 2, 2001, HHCI filed a Motion for Attorney Fees in the Administrative Complaint cases. On November 8, 2001, HHCI filed a Motion to Dismiss in DOAH Consolidated Case No. 01- 4124. AHCA failed to respond to either motion. By Order to Show Cause dated November 30, 2001, AHCA was directed to respond to the motions. AHCA thereafter filed a Notice of Voluntary Dismissal that failed to address the issues raised in the HHCI Motion for Attorney Fees. A telephone conference between the parties was convened, at which point it appeared that there was confusion at AHCA regarding the applicability of the fee decision in the rule challenge case to the instant fee case.

Based on the conference call discussion, AHCA was provided with another opportunity to respond to the Motion for Attorney Fees.

On January 16, 2002, AHCA filed an Amended Notice of Voluntary Dismissal and Response to Order to Show Cause that included a memorandum related to the instant request for fees. In the response, AHCA asserted that the matter of fees and costs for both the rule challenge case and the Administrative Complaint cases had been addressed at the hearing in DOAH Case No. 01-4283F. On January 28, 2002, HHCI filed a response to the AHCA memorandum.

It should be noted that the Administrative Complaint cases were never consolidated with the rule challenge case.

Similarly, the requests for fees and costs were never consolidated.

A second telephone conference ensued at which time it was determined that the Administrative Complaint cases would be closed and that HHCI would file a separate fee petition addressing the fees and costs incurred in defending against the Administrative Complaints unrelated to those addressed in the Final Order in DOAH Case No. 01-4283F.

On April 9, 2002, HHCI, a foreign limited partnership operating in the State of Florida, canceled the registration of HHCI Limited Partnership with the Florida Department of State.

On May 13, 2002, HHCI filed a Petition for Award of Attorney's Fees and Costs pursuant to Sections 120.569(2)(e) and 120.595(1), Florida Statutes.

A Notice of Hearing was entered scheduling the formal hearing for July 24, 2002. At the request of the parties, the hearing was subsequently rescheduled for September 24, 2002, and then for October 17, 2002.

On September 13, 2002, AHCA filed a Motion for Summary Final Order and Attorney's Fees on the grounds that by canceling its registration in Florida HHCI no longer had standing to seek an award for fees and costs. For the reasons set forth herein, AHCA's Motion for Summary Final Order and Attorney's Fees is denied.

At the hearing on October 17, 2002, HHCI presented the testimony of Al Clark, an expert in attorney's fees; Malcolm Harkins, partner with the Proskauer Rose law firm in Washington, D.C.; and Scott Griggs, HHCI's in-house general counsel. HHCI Exhibits 2, 4 through 10, and 16 were admitted into evidence.

AHCA offered the testimony of William McCort and had Exhibit 1 admitted into evidence.

The Transcript of the hearing was filed on October 22, 2002. Both parties filed Proposed Final Orders that were considered in the preparation of this Final Order.

On November 6, 2002, HHCI filed a Motion for Leave to File Late-Filed Exhibit. AHCA filed a response in opposition to the Motion. The Motion is granted and the exhibit, an invoice from Al Clark, is referenced herein.

FINDINGS OF FACT

1. On October 3, 2001, AHCA served three Administrative Complaints on HHCI, apparently intending to revoke HHCI's licenses to operate nursing homes on the basis of a retroactive application of Section 400.121(3)(d), Florida Statutes (2001). The statute states in pertinent part:

   (3) The agency shall revoke or deny a nursing home license if the licensee or controlling interest operates a facility in this state that:

   * * *

   (d) Is cited for two class I deficiencies arising from separate surveys or investigations within a 30-month period.

   
   

2. HHCI filed petitions challenging AHCA's allegations in the Administrative Complaints.

3. On October 12, 2001, HHCI filed a challenge to the non- rule policy of retroactive application (DOAH Case No. 01-3935RU) and a hearing was scheduled for October 23, 2001.

4. The Petitions in the Administrative Complaint cases were forwarded by AHCA to DOAH on October 19, 2001, and were consolidated under DOAH Case No. 01-4124.

5. The Final Order in Case No. 01-3935 RU, declaring AHCA's policy of retroactive application invalid, was issued on October 31, 2001.

6. HHCI filed a Motion for Award of Attorney's fees in DOAH Case No. 01-4124 on November 2, 2001. That motion forms the basis for the instant case.

7. At the time the Administrative Complaints were filed, the three HHCI facilities held standard licenses and were apparently operating in compliance with applicable law, with no unresolved survey violations pending.

8. The day after the Administrative Complaints were served, AHCA issued a press release and scheduled a telephonic "media call-in" to reply to questions from interested press representatives. The result of the media attention was to cause great concern to both HHCI and the residents of their facilities as to the proposed closure of the facilities.

9. AHCA distributed a letter to residents indicating that unless HHCI challenged the action, the facility would be closed in approximately 60 days. The AHCA letter advised residents that if HHCI challenged the proposed action, the proposed action "may be delayed." The AHCA letter did not indicate that any resolution of the dispute other than facility closure was possible.

10. The result of the attention and statements by AHCA's representative was to cause great concern among residents and their families as to what living arrangements would be available for residents of the facilities.

11. AHCA also placed monitors in each facility to discuss the pending action with residents and their families, as well as to observe the facility operations. There is no evidence that the placement of monitors in the facilities offered any level of comfort to residents or families. The monitors also apparently began citing the facilities for alleged additional violations of various regulations.

12. In response, HHCI officials immediately sought legal counsel to address the situation. Counsel at the Washington, D.C., law firm, Proskauer Rose, became involved in representing HHCI. HHCI also retained Counsel in the Tallahassee office of the Broad and Cassel law firm, with whom it had no prior relationship.

13. HHCI directed its legal team to review all possible options to resolving the matter expeditiously. Counsel considered both federal and state court action and filed a request for injunction in state court.

14. HHCI also attempted to resolve the matter informally.

    
    

    On October 8, 2001, HHCI obtained an opinion from the Joint Administrative Procedures Committee (JAPC), a standing committee

    of the Florida Legislature, which concluded that "a strong legal argument" could be made that the retroactive application of the statute was improper. There is no evidence that AHCA considered the JAPC opinion.

15. In any event, because informal attempts to resolve the matter were unsuccessful, HHCI legal counsel began an intensive effort to defend the company against the AHCA action.

16. The Final Order in Case No. 01-3935RU held that there was an absence of legal authority to apply the new law retroactively. There was no appeal of the Final Order. After the Final Order was issued, AHCA abandoned the Administrative Complaints that sought to revoke HHCI's licenses and close the facilities.

17. In this proceeding, HHCI seeks fees it incurred for the Broad and Cassel and the Proskauer Rose law firms and for presentation of the testimony of Al Clark at the fee hearing.

18. HHCI presented nine invoices from Broad and Cassel that were admitted as HHCI Exhibit 1. The invoices submitted in this case do not duplicate time that was invoiced as part of the rule challenge-related fee case.

19. Invoice #469914 dated November 1, 2001, is for a total of $23,835.87, including fees of $23,565 and costs of $270.87. The majority of the work in these cases was performed in

    October. The invoice indicates time spent considering several theories of defense to the complaints.

20. Invoice #474211 dated December 1, 2001, is for a total of $2,282.02, including fees of $1,981.50 and costs of $300.52.

21. Invoice #479185 dated January 2, 2002, is for a total of $257.59, including fees of $245 and costs of $12.59.

22. Invoice #491866 dated February 9, 2002, is for a total of $5,463.05, including fees of $5,116.50 and costs of $346.55.

23. Invoice #496833 dated April 3, 2002, is for a total of

    
    

    $161.74, including fees of $147 and costs of $14.74.

    
    

24. Invoice #505207 dated June 7, 2002, is for a total of

    
    

    $738.68, including fees of $735 and costs of $3.68.

    
    

25. Invoice #507485 dated July 2, 2002, is for a total of

    
    

    $296.17, including fees of $294 and costs of $2.17.

    
    

26. Invoice #515997 dated October 2, 2002, is for a total of $1,625.93, including fees of $1586 and costs of $39.93.

27. Invoice #516952 dated October 16, 2002, is for a total of $2,903.35, including fees of $2878 and costs of $25.35.

28. HHCI presented the testimony of Al Clark, who was accepted as an expert on the issue of attorney fees. Mr. Clark testified as to the reasonableness of the fees and costs charged to HHCI by the Broad and Cassel law firm. Mr. Clark's testimony was not contradicted and is credited.

29. The time and labor expended by employees of the Broad and Cassel law firm were reasonable in light of the legal issues presented by the administrative actions proposed by AHCA. The presumed goal of AHCA's action was to revoke the licensure of HHCI's three nursing homes. Broad and Cassel provided the substantial skill and expertise required to supply the necessary legal services.

30. Broad and Cassel billed HHCI at an hourly rate. The hourly rates charged by Broad and Cassel personnel are reasonable. The rates ranged from $245 per hour for lead counsel to $90 per hour for support counsel.

31. There was no prior business relationship between Broad and Cassel and HHCI. Broad and Cassel counsel has significant experience and skill in health care law and provided their services efficiently throughout the dispute.

32. Because the proposed sanction was severe, and because the agency publicized its legal action, HHCI required an immediate legal response resulting in an intense initial amount of work by Broad and Cassel.

33. Broad and Cassel personnel represented HHCI legal interests throughout the administrative proceedings and prevailed in defending against the proposed administrative action.

34. Subsequent to the hearing, HHCI submitted Mr. Clark's invoice for $1,012.50. Mr. Clark's invoice reflects a reasonable effort expended in addressing the costs and fees at issue in this case.

35. At the hearing, Mr. Clark further testified that an amount up to $10,000 would be possible for the resolution of this fee case. At this time, none of this expense has been incurred and is not properly awarded.

36. Based on the foregoing, HHCI has satisfied the factors set forth in Florida Bar Rule 4-1.5(b) related to awards of fees and costs in this case, and is entitled to an award of fees and costs for the Broad and Cassel billing and for Al Clark's invoice.

37. Mr. Clark was not asked for, and did not offer, an opinion about the reasonableness of the Proskauer Rose fees.

38. There is no credible evidence supporting an award of fees for work performed by the Proskauer Rose firm. Based on the testimony presented during the hearing, the evidence fails to establish that the charges by the Proskauer Rose firm as set forth on the exhibit are reasonable.

39. Billing records admitted into evidence as HHCI Exhibit 3 contain references to regulatory matters not directly at issue in the proceedings giving rise to this request for fees. Such additional matters include nursing home surveys

    performed in October 2001, preparations for informal dispute resolution (IDR) meeting related to survey issues, and regulatory matters occurring in other states.

40. The IDR preparations, although apparently prompted by alleged problems identified by the monitors, were not at issue in the Administrative Complaints that form the basis for this fee request. Although HHCI asserts that an Administrative Law Judge, hearing the Administrative Complaints seeking license revocation, could have considered the alleged problems, such allegations would have required amendment of the pending Administrative Complaints. More likely, the allegations would have been the subject of new Administrative Complaints that would have been litigated separately, and, as such, costs related to IDR preparation are not properly awarded in the instant case.

41. Further, the Proskauer Rose invoices indicate that hours billed on one invoice in "File #84028.0014" for October 12 (description beginning with "review faxed 256") and October 22 (description beginning with "Meeting with S. Davis and

    C. Schessler re preparation for IDR") were also billed on another invoice in "File #84028.0015." Duplicate billings would not support an award of attorney fees.

    AHCA'S MOTION FOR SUMMARY JUDGMENT

    
    

42. On April 9, 2002, HHCI, a foreign limited partnership operating in the State of Florida, canceled the registration of HHCI Limited Partnership with the Florida Department of State.

43. HHCI Limited Partnership continues to operate in other states and is registered in Massachusetts.

    CONCLUSIONS OF LAW

    
    

44. DOAH has jurisdiction over the parties and the subject matter of the proceeding. Section 120.569(2)(e), Florida Statutes.

45. Section 120.569(2)(e), Florida Statutes, provides as follows:

    All pleadings, motions, or other papers filed in the proceeding must be signed by the party, the party's attorney, or the party's qualified representative. The signature constitutes a certificate that the person has read the pleading, motion, or other paper and that, based upon reasonable inquiry, it is not interposed for any improper purposes, such as to harass or to cause unnecessary delay, or for frivolous purpose or needless increase in the cost of litigation. If a pleading, motion, or other paper is signed in violation of these requirements, the presiding officer shall impose upon the person who signed it, the represented party, or both, an appropriate sanction, which may include an order to pay the other party or parties the amount of reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee. (emphasis supplied).

46. HHCI asserts that AHCA filed the Administrative Complaints for an improper purpose, specifically to counter negative attention AHCA had allegedly received for nursing home regulatory problems, and to generate publicity for increased vigilance on the agency's part. HHCI asserts that AHCA then delayed settlement of the dispute, resulting in a "needless increase in the cost of litigation."

47. Whether AHCA counsel knew that retroactive application of the law was inappropriate, or whether AHCA chose to proceed with uncertain authority in prosecuting the cases, is not relevant. A court should not delve into an attorney's or party's subjective intent or into a good faith-bad faith analysis. Instead, if a reasonably clear legal justification can be shown for the filing of an Administrative Complaint, improper purpose cannot be found and sanctions are inappropriate. Mercedes Lighting and Elec. Supply, Inc. v. Dept. of General Services, 560 So. 2d 272, 278.

48. Otherwise stated, the central issue in considering whether the sanction of attorney's fees should result is whether there was a clear legal justification for prosecuting the case. In this case, there was not. AHCA acted without any reasonable basis in law in attempting to apply the newly enacted statute retroactively. There is no need to review the issue of retroactive application here. The Final Order in the rule case

    clearly states the applicable law, and there was no appeal of the order.

49. Even if under some mistaken legal theory AHCA believed that it could implement the statute retroactively, certainly as of October 5, 2001, (two days after the Administrative Complaints were filed) AHCA was on notice, based on the JAPC opinion, that retroactive application of the statute was improper. The JAPC opinion clearly references the well- established proposition that "absent a clear legislative expression requiring retroactive application, a law is presumed to operate prospectively, meaning that it will apply only to conduct occurring after the statute becomes effective" (citing Middlebrooks v. Department of State, Division of Licensing, 565 So. 2d 727 (Fla. 1st DCA 1990). There is no evidence of record as to whether or not AHCA considered the JAPC opinion at any point in the process.

50. AHCA's attempted retroactive application of the regulatory statute was intended to revoke the licensure of three nursing homes that were operating under standard licenses at the time the complaints were filed. AHCA had no authority to enforce the newly enacted statute retroactively. AHCA's attempt to enforce the statute resulted in needless litigation. HHCI's defense against the complaints incurred substantial expenses for which AHCA should be required to reimburse to the extent that

    such expenses are determined to be reasonable based upon the evidence presented during the hearing on the instant case.

51. HHCI also asserts that AHCA's action in this matter was for an improper purpose (specifically publicity) and cites to AHCA's issuance of a press release and subsequent press availability as proof of the improper purpose. The evidence fails to support the assertion. It is not uncommon nor is it inappropriate for a government agency to issue a press release in order to publicize an agency's regulatory action. The fact that AHCA did so in this case, does not establish that it acted improperly.

52. Although HHCI cited Section 120.595(1)(b), Florida Statutes, as a basis for this claim, the section is not applicable. Section 120.595(1)(b), Florida Statutes, provides as follows:

    (b) The final order in a proceeding pursuant to s. 120.57(1) shall award reasonable costs and a reasonable attorney's fee to the prevailing party only where the nonprevailing adverse party has been determined by the administrative law judge to have participated in the proceeding for an improper purpose.

    
    

53. In this case, AHCA does not meet the definition of a "nonprevailing adverse party," as defined in Subsection 120.595(1)(e)3., Florida Statutes, as one "that has failed to

    have substantially changed the outcome of the proposed or final agency action "

    AHCA'S MOTION FOR SUMMARY FINAL ORDER

    
    

54. On September 13, 2002, AHCA moved for summary Final Order in this case, citing Section 620.159(2), Florida Statutes, which provides as follows:

    Upon dissolution of a limited partnership and until the filing of a certificate of cancellation, persons winding up the limited partnership's affairs may, in the name of, and for and on behalf of, the limited partnership, prosecute and defend suits, whether civil, criminal, or administrative, gradually settle and close the limited partnership's business, dispose of and convey the limited partnership's property, discharge the limited partnership's liabilities, and distribute to the partners any remaining assets of the limited partnership, all without affecting the liability of limited partners.

    
    

55. On April 9, 2002, HHCI Limited Partnership cancelled its Florida registration with the Florida Department of State. There is no evidence that HHCI Limited Partnership has been dissolved. The evidence establishes that the HHCI Limited Partnership continues to exist but is not doing business in Florida.

56. Section 620.179(3), Florida Statutes, provides that the "failure of a foreign limited partnership to register in this state, or the failure of a domestic or foreign limited partnership to continue in effect its authority to transact

    business in this state, does not . . . prevent the partnership from defending any action, suit, or proceeding in any court of this state."

57. At the time of the hearing, HHCI was continuing to defend the appeal of the fee award made in the rule challenge, currently pending at the First District Court of Appeal.

58. HHCI initiated this request for fees and costs at the commencement of the Administrative Complaint process. The fee issue would have been resolved long ago but for the fact that AHCA was provided with repeated opportunities to address the fee issue. AHCA asserts that the Final Order entered in the rule challenge fee case included the fee request in the Administrative Complaint cases. The assertion is not persuasive. The cases were not consolidated, and there is no evidence that the fees sought in the instant hearing duplicate fees awarded in the rule challenge fee case.

59. HHCI's request for fees was part of its defense in the underlying cases. HHCI seeks sanctions because it was required to defend against Administrative Complaints filed against HHCI without a reasonable supporting basis in law or fact. The Motion for Summary Recommended Order is denied.

FINAL ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, AHCA is hereby directed to pay HHCI the amount of

$38,576.90 (including Broad and Cassel invoices totaling

$37,564.40, and the Al Clark invoice of $1,012.50) as reasonable attorney's fees and costs under Section 120.569(2)(e), Florida Statutes.

DONE AND ORDERED this 21st day of November, 2002, in Tallahassee, Leon County, Florida.

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 21st day of November, 2002.

COPIES FURNISHED:

Christine T. Messana, Esquire Richard J. Saliba, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop No. 3 Tallahassee, Florida 32308-5403

Donna H. Stinson, Esquire Broad & Cassel

215 South Monroe Street, Suite 400 Post Office Box 11300 Tallahassee, Florida 32302

Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive

Mail Stop No. 3

Tallahassee, Florida 32308-5403

Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building, Suite 3431 Tallahassee, Florida 32308

Rhonda M Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building, Suite 3116 Tallahassee, Florida 32308

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 the original notice of appeal with the Clerk of the Division of Administrative Hearings and a 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: 02-001951F

Orders for Case No: 02-001951F