STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
FLORIDA BANKERS ASSOCIATION, )
)
Petitioner, )
)
vs. ) Case No. 98-4118F
)
DEPARTMENT OF INSURANCE, )
)
Respondent. )
) COMMUNITY BANKERS OF FLORIDA, )
)
Petitioner, )
)
vs. ) Case No. 98-4252F
)
DEPARTMENT OF INSURANCE, )
)
Respondent. )
) SPECIALTY AGENTS, INC., )
)
Petitioner, )
)
vs. ) Case No. 98-4471F
)
DEPARTMENT OF INSURANCE, )
)
Respondent. )
)
FINAL ORDER ON REMAND
On January 5, 1999, a formal administrative hearing was held in Tallahassee, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings, on the matter of whether the Petitioners are entitled to an award of attorneys' fees and costs pursuant to Section 120.595(2), Florida Statutes.
The fee cases arose from the Petitioners' successful challenge to various portions of Department of Insurance proposed Rule Chapter 4-224, Parity of Agent Regulation. The rule challenges (DOAH Case Nos. 97-2984RP, 97-2985RP and 97-2987RP) were heard in December 1997.
The Final Order entered in the consolidated rule challenge cases provided for an award of fees and costs as directed at Section 120.595(2), Florida Statutes. Subsequent to the expiration of the time for appeal of the Final Order, the Petitioners filed Petitions for Fees and Costs.
The matter was heard on January 5, 1999. A Transcript of the hearing was filed on January 25, 1999. All parties filed Proposed Final Orders.
A Final Order was entered awarding fees and costs to the Florida Bankers Association and the Community Bankers of Florida, and denying an award of fees to Specialty Agents, Inc. The Respondents appealed the Final Order to the First District Court of Appeal. The Court issued an order reversing and remanding, for appropriate Findings of Fact, the award of fees and costs to the Florida Bankers Association and the Community Bankers of Florida (Case Nos. 98-4118F and 98-4252F), and affirming the denial of fees to Specialty Agents, Inc. (Case
No. 98-4471F). This Order is entered in response to the remand and sets forth additional Findings of Fact related to Case Nos. 98-4118F and 98-4252F.
FINDINGS OF FACT
The Florida Department of Insurance (Department) is responsible for regulation of insurance transactions in the State of Florida.
In 1996, the United States Supreme Court held in Barnett Bank of Marion County, N. A. v. Nelson, 517 U.S. 25 (1996) that nationally chartered banks located in towns with populations of 5000 or less were authorized to own insurance agencies.
In response, the 1996 Florida legislature revised Section 626.988, Florida Statutes (the "anti-affiliation" statute) to conform to the Court's ruling in the Barnett case
The 1996 legislature also enacted Section 626.5715, Florida Statutes, informally identified as the "parity statute."
Section 626.5715, Florida Statutes, provides as follows:
The department shall adopt rules to assure the parity of regulation in this state of insurance transactions as between an insurance agency owned by or an agent associated with a federally chartered financial institution, an insurance agency owned by or an agent associated with a state- chartered financial institution, and an insurance agency owned by or an agent associated with an entity that is not a financial institution. Such rules shall be limited to assuring that no insurance agency or agent is subject to more stringent or less stringent regulation than another insurance agency or agent on the basis of the regulatory status of the entity that owns the agency or is associated with the agent. For the purposes of this section, a person is "associated with" another entity if the person is employed by, retained by, under contract to, or owned or controlled by the entity directly or indirectly. This section
does not apply with respect to a financial institution that is prohibited from owning an insurance agency or that is prohibited from being associated with an insurance agent under state or federal law. (Emphasis supplied.)
The 1996 legislature also amended to Chapter 120, Florida Statutes (the Administrative Procedures Act) to restrict agency authority to promulgate rules, so as to prohibit the adoption of rules which, although perhaps rationally related to the purpose of an implementing statute, were not specifically authorized by the legislature.
In the summer of 1996, the Department began circulating a draft of rules intended to address issues related to the sale of insurance in financial institutions.
Beginning in January 1997, the Department began the formal process of adopting rules intended to address the "parity" of insurance regulation between insurance agencies affiliated with financial institutions and agencies which are unaffiliated.
The Petitioners challenged parts or all of the proposed rules as invalid exercises of delegated legislative authority.
As set forth in the Final Order entered June 29, 1998, in the consolidated rule challenges, Proposed Rules 4-224.002,
4-224.004, 4-224.007, 4-224.012, 4-224.013 and 4-224.014, Florida
Administrative Code, were determined to be invalid exercises of delegated legislative authority.
Although the challenged rules were determined to be invalid exercises of delegated legislative authority for various
reasons, all were determined to be outside the Department's specific statutory authority as set forth by the legislature.
There was no appeal of the Final Order.
Prior to the hearing on the fee issue, all parties signed and filed a Prehearing Stipulation.
According to the Prehearing Stipulation, "[t]he Department disputes entitlement to fees as a matter of law. It does not dispute the reasonableness of the fees, as capped by statute. It disputes the reasonableness of the costs sought by Florida Bankers Association. "
The applicable statute provides that "a judgment or order shall be rendered against the agency for reasonable costs and reasonable attorney's fees, unless the agency demonstrates that its actions were substantially justified or special circumstances exist which would make the award unjust."
The Department asserts that the agency's actions in adopting the challenged rules were substantially justified and that special circumstances exist which make the award unjust. The greater weight of the evidence fails to support the assertion.
The evidence establishes that, from the initiation of the rule drafting process, the issue of whether the Department had the authority to adopt the proposed rules was of concern to the parties in this case.
In response to an early draft of the rule circulated by the Department, the Florida Bankers Association (FBA) in June 1996 asserted that the proposed rules were outside the Department's authority under the parity statute. The FBA continued to maintain this position throughout the rule-drafting process and the subsequent rule challenge cases.
The Department was apparently also concerned about whether the agency had authority to adopt the rules. In response to a question raised by Department legal staff, a December 31, 1996, letter to the Department from an attorney at the Joint Administrative Procedures Committee on the issue of authority indicates that the Department's general authority to adopt rules was restricted by the 1996 APA amendment to Section 120.536(1), Florida Statutes, and that additional specific authority would be required to support the promulgation of rules.
At the fee hearing, the Department conceded that the parity statute alone did not grant the agency with the specific authority to prescribe or proscribe specific acts or actions of an insurance agent.
The Department asserted that the authority for the proposed rules was set forth by the combination of Section 626.988, Florida Statutes, under which pre-existing rules had been adopted, with the Department's previous legal actions related to insurance sales by agents affiliated with financial
institutions, and the presumed effect of the parity statute on the Department's otherwise-existing authority.
The evidence fails to establish that the Department's reliance on historical authority to promulgate rules and the authority provided under the parity statute was reasonable given legislative restrictions on agency rulemaking set forth in the 1996 legislature's amendments to the Administrative Procedures Act.
There was no credible evidence presented at the rule challenge hearing or during the fee hearing which suggested that an emergency, either existing or potential, which required the Department to take immediate action to protect insurance consumers.
There was no credible evidence presented at the rule challenge hearing or during the fee hearing that insurance consumers were threatened by an availability of insurance products in settings other than in insurance agencies.
There are no special circumstances that make an award of fees and costs unjust.
The Department apparently asserts that because the FBA participated in the rulemaking process, special circumstances exist which make an award of fees unjust.
Although the FBA participated in the workshop process, the FBA consistently asserted, as stated earlier, that the
proposed rules were outside the Department's authority under the parity statute.
By letter of June 5, 1996, the FBA specifically filed written objections to the proposed rules, asserting that they were inconsistent with the APA amendments and the authority granted by the parity statute.
Further, the FBA noted in the June letter and again in a letter of September 27, 1996, that the purpose and authority of the parity statute was met by a single proposed rule which, in essence, stated that the provisions of the Florida Insurance Code were applicable equally to all agents and agencies, regardless of ownership or affiliation.
At the fee hearing, the Department acknowledged that the FBA had raised specific objections regarding the agency's lack of statutory authority during the rule process.
The FBA consistently asserted during the rulemaking process that the proposed rules were outside the Department's authority under the parity statute. The FBA pursued the assertion throughout the rulemaking process and successfully challenged the rules on the same basis.
There was no evidence presented during the rule challenge or the fee case suggesting that the FBA retreated from the objection at any point in the rulemaking process.
According to the Prehearing Stipulation signed and filed by the parties, the disputed issues of fact are whether the
expert witness fee paid to Dr. Michael White was reasonable and whether other costs sought to be recoverable are reasonable.
The only specific challenge presented by the Department to costs is directed towards Dr. White's fees. The evidence establishes that under the circumstances of this matter,
Dr. White's fee is reasonable.
At the fee case hearing, the FBA presented the deposition testimony of William B. Graham, an attorney practicing in Tallahassee, Florida, in support of Dr. White's fees.
Mr. Graham's testimony is accepted and credited as to the amount of Dr. White's fee and to the time required to prepare for and participate in this proceeding.
Based on Mr. Graham's testimony, Dr. White's fee of
$320 per hour is reasonable for an expert of Dr. White's credentials. There is no credible evidence to the contrary.
According to the three dated invoices submitted to the FBA by Dr. White, Dr. White expended a total of 106 hours and five minutes in rule challenge-related activities on behalf of the FBA.
Based on Mr. Graham's testimony, the time recorded by Dr. White of 106 hours and five minutes for his services is reasonable under the circumstances of the rule challenge. There is no credible evidence to the contrary.
The total amount of time billed by Dr. White results in a fee of $33,946.66.
The three invoices submitted by Dr. White also bill the FBA for expenses totaling $2,643.72. There is no credible evidence that the Dr. White's expense billings are unreasonable.
The total amount of fees and expenses charged by Dr. White to the FBA is $36,590.38.
The FBA paid to Dr. White the total amount reflected on his invoices.
By comparison with the fees charged by its own expert, the Department asserts that Dr. White's fees are unreasonable. The fact that the Department paid its expert less than the FBA paid to its own does not establish that payments to Dr. White were unreasonable.
The amount of the attorney's fees to which the successful parties are entitled is not at issue in this proceeding. According to the Prehearing Stipulation, the Department "while contesting entitlement to any award of
fees . . . does not dispute that the fees sought, as capped by the statute, is reasonable for the efforts of all counsel in this proceeding."
The FBA, by affidavit, identified attorney's fees totaling $145,683.01, and seeks an award of $15,000, the statutory limit.
By stipulation of the parties, the FBA is entitled to an award of attorney's fees in the amount of $15,000.
The FBA identified total costs of $40,537.53, including the fees and expenses paid to Dr. White. There is no evidence that the costs of $3,947.15 set forth in the attorney billing records (and unrelated to costs related to Dr. White) are unreasonable.
Based on the foregoing, the FBA is entitled to receive a total of $55,537.53.
The Community Bankers Association identified attorney's fees totaling $10,290.00, and costs of $806.23.
By stipulation of the parties, the Community Bankers Association is entitled to an award of attorney's fees in the amount of $10,290.00. There is no evidence that the Community Bankers Association costs of $806.23 are unreasonable.
Based on the foregoing, the Community Bankers Association is entitled to receive a total of $11,096.23.
The Department asserts that, due to "untimeliness" of the Petitions for Fees filed in these cases, an award of fees in this case is unjust. There is no issue of timeliness to be addressed in this matter. The Petitions for Fees were filed approximately 60-90 days after the time for appeal of the Final Order in the rule challenge cases had passed. The Final Order entered in the rule challenge proceeding specifically retained jurisdiction for an award of fees. There is no evidence that the Department was adversely affected by any delay in filing the Petitions for Fees.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding.
Section 120.595(2), Florida Statutes.
As set forth herein, the Petitioners are entitled to an award of reasonable attorney's fees and costs pursuant to Section 120.595(2), Florida Statutes, which provides as follows:
CHALLENGES TO PROPOSED AGENCY RULES PURSUANT
TO SECTION 120.56(2).--If the court or administrative law judge declares a proposed rule or portion of a proposed rule invalid pursuant to s. 120.56(2), a judgment or order shall be rendered against the agency for reasonable costs and reasonable attorney's fees, unless the agency demonstrates that its actions were substantially justified or special circumstances exist which would make the award unjust. An agency's actions are "substantially justified" if there was a reasonable basis in law and fact at the time the actions were taken by the agency. If the agency prevails in the proceedings, the court or administrative law judge shall award reasonable costs and reasonable attorney's fees against a party if the court or administrative law judge determines that a party participated in the proceedings for an improper purpose as defined by paragraph (1)(e). No award of attorney's fees as provided by this subsection shall exceed
$15,000. (Emphasis supplied)
The law requires that unless the Department demonstrates that its actions were substantially justified or special circumstances exist which would make the award unjust, the Petitioners are entitled to an award of reasonable costs and reasonable attorney's fees in this case.
The Department has failed to meet the burden of demonstrating that the Department's actions in adopting the challenged rules were substantially justified or that special circumstances exist which make the award unjust.
From the initiation of the rule adoption process, the Department was on notice that the FBA believed the proposed rules exceeded the agency's authority under the parity statute.
As the FBA correctly noted as early as June of 1996, the purpose of the parity statute was effectively met by a proposed rule which clearly provided that the Florida Insurance Code would apply to all persons transacting insurance in Florida without regard to agency or institutional affiliation. The parity statute did not provide specific authority for the adoption of the remainder of the proposed rules.
The Department was further advised by the Joint Administrative Procedures Committee, in response to inquiry from the Department, that 1966 amendments to the Administrative Procedures Act operated to restrict the agency's rulemaking authority, and that specific authorization to adopt a rule was required.
Despite questionable authority, the Department proceeded to rulemaking and proposed the rules. The Petitioners successfully challenged the proposed rules, in part based on the assertion that the proposed rules were outside the Department's authority.
On remand, the District Court, citing Helmy v. Dept of Business and Professional Regulation, 707 So. 2d 366 (Fla. 1st DCA 1998) suggests that an agency can make a minimal showing of substantial justification by demonstrating "a working knowledge of the applicable statutes under which it is proceeding."
Here the evidence fails to demonstrate the Department's "working knowledge of the applicable statutes."
The Department was clearly on notice that the authority under which it chose to proceed in promulgating the proposed rules was at best uncertain. Despite the uncertainty, the Department proceeded to proposed a set of rules which exceeded the limited authority of the "parity" statute and essentially attempted to impose restrictions on insurance sales occurring outside of insurance agency settings. Given the limited authority of the "parity" statute and the legislature's restrictions on agency rulemaking, the Department's actions fail to establish a working knowledge of the applicable statutes.
Section 120.595(2), Florida Statutes, provides that where an administrative law judge declares a proposed rule or portion of a proposed rule invalid pursuant to Section 120.56(2), Florida Statutes, an order shall be rendered against the agency for reasonable costs and reasonable attorney's fees, unless the agency demonstrates that its actions were substantially justified or special circumstances exist which would make the award unjust.
In this case, the evidence establishes the reasonableness of the fees and costs. The evidence fails to establish that the Department's actions were substantially justified or that there are special circumstances that would make the award unjust. Based on the foregoing, an award of fees and costs are required by the statute.
FINAL ORDER
Based on the foregoing Findings of Fact and Conclusions of Law, the Department of Insurance shall pay total fees and costs as follows:
The Florida Bankers Association shall receive a total of
$55,537.53
The Community Bankers of Florida shall receive a total of $11,096.23.
DONE AND ORDERED this 6th day of December, 2000, 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 6th day of December, 2000.
COPIES FURNISHED:
Virginia B. Townes, Esquire Akerman, Senterfitt & Eidson, P.A. Post Office Box 231
Orlando, Florida 32802-0231
Counsel for Florida Bankers Association
Michael H. Davidson, Esquire Department of Insurance
612 Larson Building
200 East Gaines Street Tallahassee, Florida 32399-0333 Counsel for Department
Martha J. Edenfield, Esquire
Pennington, Moore, Wilkinson & Dunbar, P.A. Post Office Box 10095
Tallahassee, Florida 32302-2095
Counsel for Community Bankers of Florida
Eli S. Jenkins
3330 Overlook Drive, Northeast St. Petersburg, Florida 33703
Authorized Representative of Specialty Agents, Inc.
Daniel Y. Sumner, General Counsel Department of Insurance
The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300
Honorable Bill Nelson
State Treasurer and Insurance Commissioner Department of Insurance
The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
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 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.
| Issue Date | Proceedings |
|---|---|
| Aug. 18, 2008 | Transmittal letter from Claudia Llado forwarding records to the agency. |
| Oct. 11, 2002 | File Returned to the Agency. |
| Apr. 22, 2002 | Final Order Amending Fee Award issued. |
| Apr. 17, 2002 | Letter to Judge Quattlebaum from V. Townes regarding second revised order filed. |
| Feb. 01, 2002 | Received record from the First District Court of Appeal |
| Nov. 27, 2001 | Mandate filed. |
| Nov. 07, 2001 | Opinion filed. |
| Jul. 30, 2001 | BY ORDER OF THE COURT: (Notice of Oral Argument) filed. |
| Apr. 17, 2001 | BY ORDER OF THE COURT: (the Court sua sponte discharges its order of April 3, 2001, requiring appellant to file an amended brief) filed. |
| Apr. 17, 2001 | BY ORDER OF THE COURT: (Appellant`s motion to strike, filed April 2, 2001, is denied) filed. |
| Apr. 04, 2001 | BY ORDER OF THE COURT: (Appellant is ordered to show cause within 10 days why the initial brief should not be strcken) filed. |
| Mar. 21, 2001 | Index, Record, Certificate of Record sent out. |
| Mar. 21, 2001 | Index, Record, Certificate of Record sent out. |
| Feb. 16, 2001 | Statement of Service Preparation of Record in the amount of $35.00 filed. |
| Feb. 14, 2001 | Index sent out. |
| Jan. 05, 2001 | Final Order of Remand filed. |
| Jan. 05, 2001 | (Respondent) Notice of Filing filed. |
| Jan. 03, 2001 | BY ORDER OF THE COURT (Appellant is directed to file within 10 days a conformed copy of the order that is being appeal) filed. |
| Jan. 02, 2001 | Letter to DOAH from the District Court of Appeal filed. First DCA Case No.1D00-5123. |
| Dec. 28, 2000 | Notice of Appeal (M. Davidson) filed. |
| Dec. 28, 2000 | Notice of Appeal (M. Davidson) filed. |
| Dec. 06, 2000 | Final Order on Remand issued. |
| Nov. 01, 2000 | Opinion filed. |
| Nov. 01, 2000 | Letter to Judge Quattlebaum from V. Townes Re: First DcA`s decsion filed. |
| Aug. 15, 2000 | Record returned from the First District Court of Appeal filed. |
| Jul. 10, 2000 | Mandate filed. |
| Jun. 22, 2000 | Corrected Opinion filed. |
| Jun. 22, 2000 | BY ORDER OF THE COURT (appellant`s motion for clarification is granted, see attached corrected opinion) filed. |
| May 18, 2000 | Opinion filed. |
| Mar. 29, 2000 | BY ORDER OF THE COURT (time for oral argument is expanded to 20 minutes per side, by the first DCA) filed. |
| Dec. 14, 1999 | BY ORDER OF THE COURT(Notice of Oral Argument, filed in the first DCA) filed. |
| Sep. 07, 1999 | BY ORDER OF THE COURT (Appellee`s Motion for Extension of time is Granted) filed. |
| Aug. 31, 1999 | BY ORDER OF THE COURT (Appellee`s Motion to Supplement the record is granted, attachment to the Motion to Supplement, which contains a copy of the deposition of William B. Graham, is accepted as the supplemental record) filed. |
| Aug. 13, 1999 | Agreed Motion to Supplement the Record on Appeal (Virginia Townes, filed with the First DCA) filed. |
| Jul. 26, 1999 | Payment in the amount of $486.00 for indexing filed. |
| Jul. 13, 1999 | Invoice for indexing in the amount of $486.00 sent out. |
| Jul. 08, 1999 | Index sent out. (Record Index to the District Court of Appeal) |
| Jun. 07, 1999 | Notice of Cross-Appeal filed. |
| Jun. 02, 1999 | Amended Notice of Appeal filed. |
| Jun. 01, 1999 | Letter to DOAH from DCA filed. DCA Case No. 1-1999-1943. |
| May 25, 1999 | Notice of Appeal filed. |
| May 04, 1999 | CASE CLOSED. Final Order sent out. Hearing held 1/5/99. |
| Feb. 10, 1999 | Proposed Final Order on Fee & Cost Issues Submitted on Behalf of Specialty Agents, Inc. (filed via facsimile). |
| Feb. 09, 1999 | Department`s Proposed Final Order rec`d |
| Feb. 09, 1999 | Closing Argument of Florida Bankers Association; Final Order (for Judge Signature) rec`d |
| Jan. 25, 1999 | Notice of Filing; DOAH Court Reporter Final Hearing Transcript filed. |
| Jan. 05, 1999 | Prehearing Stipulation filed. |
| Jan. 05, 1999 | CASE STATUS: Hearing Held. |
| Jan. 04, 1999 | Affidavit in Support of Motion for Attorneys` Fees (filed via facsimile). |
| Dec. 31, 1998 | (E. Jenkins) Supplemental Affidavit & Motion for Attorney`s Fees; Sworn Affidavit of Qualifications of Prospective Representative (filed via facsimile). |
| Dec. 30, 1998 | (Petitioner) Notice of Taking Deposition (filed via facsimile). |
| Dec. 29, 1998 | (Petitioner) Notice of Taking Deposition (filed via facsimile). |
| Dec. 29, 1998 | (Specialty Agents) Motion for Costs and Fees; Cover Letter (filed via facsimile). |
| Dec. 04, 1998 | Order Establishing Prehearing Procedure sent out. |
| Dec. 04, 1998 | Order of Consolidation and Notice of Hearing sent out. (98-4118F, 98-4252F & 98-4471F consolidated; hearing set for 1/5/99; 9:00am; Tallahassee) |
| Oct. 19, 1998 | Department`s Response in Opposition to Florida Bankers Association`s Motion to Assess Costs and Attorneys` Fees filed. |
| Oct. 19, 1998 | Department`s Response in Opposition to Specialty Agents Inc.`s Motion to Assess Costs and Attorney Fees filed. |
| Oct. 05, 1998 | Notification Card sent out. |
| Sep. 30, 1998 | Motion for Costs and Fees; Affidavit of Martha J. Edenfield filed. |
| Sep. 30, 1998 | Department`s Response in Opposition to Community Bankers of Florida`s Motion to Assess Costs and Attorneys` Fees filed. |
| Sep. 28, 1998 | Department`s Response in Opposition to Florida Bankers Association`s Motion to Assess Costs and Attorneys Fees filed. |
| Sep. 28, 1998 | Motion for Costs and Fees; Affidavit of Martha J. Edenfield filed. (Prior DOAH No. is 97-2985RP) |
| Issue Date | Document | Summary |
|---|---|---|
| Dec. 06, 2000 | DOAH Final Order | Evidence establishes that Petitioners are entitled to fees and costs. Party`s participation in rulemaking is not a special circumstance which makes an award of fees unjust. |
| Jul. 07, 2000 | Mandate | |
| Jun. 21, 2000 | Opinion | |
| May 18, 2000 | Opinion |
