STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DENNIS L. VALDEZ,

Petitioner,

vs.

DEPARTMENT OF MANAGEMENT SERVICES, DIVISION OF RETIREMENT,

Respondent.

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) Case No. 05-1991

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RECOMMENDED ORDER

This case came before Administrative Law Judge John G. Van Laningham for final hearing by video teleconference on August 18, 2005, at sites in Tallahassee and Miami, Florida.

APPEARANCES

For Petitioner: Thomas F. Pepe, Esquire

Pepe & Nemire, P.A.

1450 Madruga Avenue, Suite 202 Coral Gables, Florida 33146

For Respondent: Larry D. Scott, Esquire

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950 STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner can rescind his election to join the Deferred Retirement Option Program and return to the status quo ante such election so that he can opt

instead to participate in the Public Employee Optional Retirement Program.

PRELIMINARY STATEMENT

By letter dated March 21, 2005, Respondent Department of Management Services, Division of Retirement, notified Petitioner Dennis L. Valdez that it intended to deny his request to retract his election to participate in the Deferred Retirement Option Program, which election had already taken effect. (Mr. Valdez wants to quit the Deferred Retirement Option Program and return to the status quo ante his participation in that program so that he can opt instead to participate in the Public Employee Optional Retirement Program.)

Mr. Valdez timely requested a formal hearing, and on

June 1, 2005, Respondent referred the matter to the Division of Administrative Hearings ("DOAH"), where an Administrative Law Judge was assigned to conduct a formal hearing.

The hearing took place on August 18, 2005, as scheduled, with both parties present, each represented by counsel. Mr. Valdez testified on his own behalf and offered Petitioner's Exhibits 1, 2, 7, 12, and 13, which were received in evidence. Respondent called two witnesses: Marti Garcia, a Senior Employee Benefits Specialist for Miami-Dade County; and Ira Gaines, an Administrator in Respondent's Bureau of Calculations. Respondent introduced the depositions of Ms. Garcia and Ron

Poppell, the Director of Educational Services, Office of the Defined Contribution Program, State Board of Administration. In addition, Respondent moved seven exhibits, numbered 3 through 9, into evidence.

The final hearing was recorded but not transcribed.

Proposed Recommended Orders were due on August 29, 2005, and each party filed one. The parties' submissions were considered.

Unless otherwise indicated, citations to the Florida Statutes refer to the 2005 Florida Statutes.

FINDINGS OF FACT

1. Petitioner Dennis Valdez ("Valdez") began working for Miami-Dade County ("County") as a paramedic/firefighter in 1979. As a county employee, he became a member of the Florida Retirement System, which is administered by Respondent Department of Management Services, Division of Retirement ("Division").

2. Firemen such as Valdez are assigned to the Special Risk Class, whose members are eligible for enhanced retirement benefits under the FRS. One advantage of being in the Special Risk Class is that the member's normal retirement date arrives after 25 years of service, rather than 30.

3. Each year the County sends its employees a statement showing the value of their employment benefits, including retirement benefits. Valdez received such a statement for 2004.

   The statement informed him, among other things, that the County offered "pre-retirement counseling" to help "plan for those years ahead." In pertinent part the statement explained:

   Miami-Dade offers you assistance in applying for retirement with the Florida Retirement System, in reviewing your options and in selecting appropriate payment options for your Deferred Compensation account. Contact the Employee Benefits Unit . . . before you expect to retire to request an estimate of your FRS benefit.

   
   

4. Early in 2004, Valdez began thinking about retirement because he would have 25 years of service at the end of July 2004. He decided to make an appointment for pre-retirement counseling through the County's Employee Benefits Unit. It was arranged for him to meet with Marti Garcia ("Garcia"), a Senior Employee Benefits Specialist, on April 15, 2004.

5. When Valdez met with Garcia as scheduled on April 15, he was a participant in the defined benefit program ("Pension Plan") of the Florida Retirement System.1 He was also eligible to participate, upon reaching his normal retirement date, in the Deferred Retirement Option Program ("DROP"). A member who elects to participate in the DROP is allowed to continue working (and drawing his salary) for up to 60 months after his retirement date, during which time the member's pension is paid into a trust fund where it earns interest at a fixed statutory rate. At the conclusion of the member's participation in the

   DROP, the Division distributes to him the retirement benefits that have accrued.

6. Valdez told Garcia that he was concerned about providing for his family, including his wife, who is younger than he, and their young children. Though Valdez had just turned 53, he advised Garcia that he did not want to remain employed as a fireman for much longer. He also asked Garcia if he could control the investment of his retirement benefits. Garcia explained to Valdez that, if he entered the DROP, he would be able eventually to invest his DROP benefits, when he terminated his employment with the County, at which point the Division would distribute the funds which had accumulated for his benefit while he was in the DROP.

7. In Garcia's presence on April 15, 2004, Valdez signed an application to participate in the DROP, using the Division's required Form DP-11. The application specified a DROP begin- date of August 1, 2004, and a DROP termination-date of July 31, 2009. At the same time, Valdez executed a notice of election to participate in the DROP, using the Division's Form DP-ELE. The notice likewise specified a DROP begin-date of August 1, 2004, and a DROP termination-date of July 31, 2009.

8. Valdez signed the application and the notice before a notary public (Garcia). Each form required Valdez to acknowledge that he could not "add additional service, change

   options, or change [his] type of retirement after the DROP begin date."

9. Garcia counter-signed both instruments and submitted them to the Division. Thereafter the Division sent Valdez an Acknowledgement of DROP Application and/or Notice of Election Form confirming the Division's receipt of his DROP application paperwork on April 21, 2004.

10. Valdez entered the DROP in August 2004. Valdez claims that some months later, he discovered that the Florida Retirement System offers another plan that provides participants a menu of market-based investment products and options in which they can invest their retirement benefits. Valdez decided that he preferred this plan——which is called the Public Employee Optional Retirement Program ("Investment Plan")——to the Pension Plan and the DROP. Therefore, in November 2004, Valdez wrote a letter to Garcia requesting that he be allowed to quit the DROP and switch to the Investment Plan.

11. Garcia responded in writing to Valdez's letter, telling him that what he had requested was not an available option. Valdez then took his case directly to the Division, which turned him down as well. The Division's denial of Valdez's request to rescind his decision to participate in the DROP is the preliminary agency action that opened the door to this formal administrative proceeding.

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has personal and subject matter jurisdiction in this proceeding pursuant to Sections 120.569, and 120.57(1), Florida Statutes.

13. The Investment Plan that Valdez would like to join arises under Section 121.4501, Florida Statutes. The Investment Plan is an optional program in which an "eligible employee" can elect to participate in lieu of participation in the Pension Plan. See § 121.4501(3), Fla. Stat.

14. The term "eligible employee" is defined unambiguously to exclude "any member participating in the" DROP. See

    § 121.4501(2)(f), Fla. Stat. Thus, Valdez is not now eligible to participate in the Investment Plan, and he has not been eligible to do so since August 2004, when his participation in the DROP commenced.

15. Prior to his DROP begin-date, however, Valdez would have been eligible to make an irrevocable "last chance" election to join the Investment Plan. See § 121.4501(4)(e), Fla. Stat. The problem for Valdez is that there is no provision in the statutes which enables a DROP participant simply to leave the DROP and return to the status quo ante his DROP begin-date. Consequently, Valdez advances several arguments in support of the position that his decision to join the DROP, for various reasons, is void or voidable and should be nullified.

16. Valdez makes three principal contentions. First, he asserts that his election to participate in the DROP, having been signed and submitted before his normal retirement date, was premature and hence void. Second, Valdez argues that he is entitled to rescind his application to participate in the DROP on the basis of a mutual (or unilateral) mistake of fact——the alleged mistake being his belief as of April 15, 2004, that the only way he could control the investment of his retirement funds was to participate in the DROP. Third, Valdez claims that the Division is estopped to deny his request to retract his election to join the DROP because Garcia, its agent, failed to disclose the existence of the Investment Plan as an option that would have allowed him to exercise control over the investment of his retirement benefits. These arguments will be taken up in turn below.

17. Valdez's position that his DROP application was premature and thus void is based on Section 121.091(13)(a)2., Florida Statutes, which provides that, subject to some exceptions and conditions not relevant to this case, a member must make his election to participate in the DROP "within 12 months immediately following the date on which [he] first reaches normal retirement date." Valdez interprets the preposition "within" as used in this section to mean "during the," making the member's normal retirement date the earliest

    date on which an election to join the DROP can be made and the anniversary thereof the deadline.

18. Although Valdez's interpretation is perhaps not unreasonable, the term "within" can also reasonably be understood to mean, in the context of Section 121.091(13)(a)2., "not later than," under which construction the statute establishes a deadline for DROP applications without setting a starting point for receiving them. That, in fact, is how the Division interprets the statute. More important, the Division has promulgated a rule reflecting its statutory interpretation. Florida Administrative Code Rule 60S-11.002(3)(a)2. authorizes the Division to accept applications for DROP participation "up to 6 months in advance of the intended DROP begin date."

19. Thus, it is concluded that Valdez's application to participate in the DROP, which was completed, submitted, and accepted less than six months before his intended DROP begin- date, was not premature and is not void.

20. In evaluating Valdez's argument that his election to participate in the DROP should be rescinded, it must be kept in mind that the function of administrative proceedings is to formulate final agency action. E.g. Beverly Enterprises- Florida, Inc. v. Department of Health and Rehabilitative

    Services, 573 So. 2d 19, 23 (Fla. 1st DCA 1990). For the Division to rescind Valdez's DROP election and restore the

    status quo ante said election as its final agency action, statutory authority enabling such action would be required because agencies possess, not inherent powers, but only those which are granted, either expressly or by necessary implication, by legislative enactment. See, e.g., East Cent. Regional Wastewater Facilities Operation Bd. v. City of West Palm Beach, 659 So. 2d 402, 404 (Fla. 4th DCA 1995); Gardinier, Inc. v.

    Florida Dept. of Pollution Control, 300 So. 2d 75, 76 (Fla. 1st DCA 1974).

21. Valdez relies upon the "preservation of rights" provision in Section 121.011(3)(d), Florida Statutes, which declares that the "rights of members of the retirement system are [of] a contractual nature, . . . and such rights shall be legally enforceable as valid contract rights and shall not be abridged in any way." Valdez argues that under this provision, he is guaranteed the full panoply of rights and remedies available under contract law, as well as equitable remedies such as rescission. Valdez's argument misses the mark for several reasons.

22. First, the "preservation of rights" clause appears to authorize a suit for rescission only if, and to the extent, members of the retirement system are afforded——under the retirement "contract" established in the statutes——the right to rescind decisions or instruments. Valdez has not cited any

    statute that gives a member the right to rescind a DROP election, and the undersigned is not aware of one.

23. Second, even if rescission were a remedy authorized under the "preservation of rights" provision, there is no language there, or anywhere else as far as the undersigned knows, empowering the Division to grant such relief. Moreover, Section 121.091(13)(a)2. strongly implies that the legal enforcement of a member's contract-like rights is a job for the courts——whose constitutional powers include enforcing contract rights——not the Division.

24. Third, DOAH does not have inherent authority to enforce or rescind contractual instruments, see School Board of Lee County v. M.C., 796 So. 2d 581, 582-83 (Fla. 2d DCA 2001), and Valdez has not identified any statute that would enable the undersigned to entertain a suit to rescind an election to enter the DROP.

25. Accordingly, it is concluded that the Division cannot, as its final agency action, order the rescission of Valdez's DROP election.

26. This leaves Valdez's estoppel argument. To establish estoppel against the state, the claimant must prove:

    1. a representation by an agent of the state as to a material fact that is contrary to a later asserted position; (2) reasonable reliance on the representation; and (3) a change in position detrimental to the party

       claiming estoppel caused by the representation and reliance thereon.

       
       

       Harris v. Department of Administration, Div. of State Employees'

       
       

       Ins., 577 So. 2d 1363, 1366 (Fla. 1st DCA 1991). In addition, "rare and exceptional circumstances" must be shown to exist.

       See Sutron Corp. v. Lake County Water Authority, 870 So. 2d 930, 933 (Fla. 5th DCA 2004). As the court in Sutron Corp.

       explained:

       
       

       The cases in which [estoppel] has been applied against a government agency involve potentially severe economic consequences to the person who relied on a government agent's misstatement of fact, or situations in which the conduct of the government was unbearably egregious.

       
       

       Id. at 933-34 (footnote omitted).

       
       

27. Valdez relied, he asserts, on Garcia's representation that the only way Valdez could control the investment of his retirement benefits was to terminate his employment with the County after participating in the DROP. Valdez further insists that this statement was not true because he could have elected to participate in the Investment Plan and taken immediate control over all of his retirement money, which fact Garcia failed to disclose. What Valdez overlooks, however, is that the Division's position——i.e. that Valdez has no right to rescind his DROP election——is not contrary to any representation made

    earlier by Garcia, who (so far as the evidence shows) never informed Valdez that he would have such a right.2

28. That Valdez might have been "deceived" by Garcia's alleged "misrepresentation" is regrettable but does not satisfy the first requisite for estoppel, namely a later asserted position that is contrary to an earlier, reliance-inducing representation. It is concluded, therefore, that estoppel does not lie.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order denying Valdez's request to rescind his election to participate in the DROP.

DONE AND ENTERED this 26th day of September, 2005, in Tallahassee, Leon County, Florida.

S

JOHN G. VAN LANINGHAM

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 26th day of September, 2005.

ENDNOTES

1/ Under the Pension Plan, a member receives a pension upon retirement, the amount of which is based on the member's years of service and other factors not relevant here.

2/ The undersigned agrees with Valdez that Garcia was acting as the Division's agent when she gave him pre-retirement counseling. See Harris, 577 So. 2d at 1367.

COPIES FURNISHED:

Thomas F. Pepe, Esquire Pepe & Nemire, P.A.

1450 Madruga Avenue, Suite 202 Coral Gables, Florida 33146

Larry D. Scott, Esquire Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Sarabeth Snuggs, Director Division of Retirement

Department of Management Services Post Office Box 9000

Tallahassee, Florida 32399-9000

Alberto Dominguez, General Counsel Division of Retirement

Department of Management Services Post Office Box 9000

Tallahassee, Florida 32399-9000

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 05-001991

Orders for Case No: 05-001991