STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SUMMARY FINAL ORDER

This case is before the undersigned based upon the Motion for Summary Final Order filed by the Department of Financial Services (Department) on February 22, 2008, and the Alternative Motion for Summary Final Order filed by Petitioner on March 5, 2008. No hearing is necessary.

APPEARANCES

For Petitioner: H. Richard Bisbee, Esquire

H. Richard Bisbee, P.A.

1882 Capital Circle Northeast, Suite 206

Tallahassee, Florida 32308

For Respondent: David J. Busch, Esquire

Department of Financial Services Division of Legal Services

612 Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0333

STATEMENT OF THE ISSUE

The issue is whether the four "unwritten policy statements" challenged by Petitioner are rules that have not been adopted through the formal rulemaking procedures.

PRELIMINARY STATEMENT

On February 6, 2008, Petitioner filed a Petition to Determine Invalidity of Agency Statements with the Division of Administrative Hearings (DOAH) pursuant to Section 120.56(4), Florida Statutes,1/ challenging four "unwritten policy statements" of the Department. The case was assigned to Judge William F. Quattlebaum and set for final hearing on March 6, 2008.

On February 14, 2008, Judge Quattlebaum directed the Department to provide notice of this proceeding to the Office of Financial Regulation (OFR) pursuant to Florida Administrative Code Rule 28-106.109. The Department did so through a Notice dated February 18, 2008. OFR did not seek to intervene in this proceeding.

On February 22, 2008, the Department filed a Motion for Summary Final Order. Attached to the motion was the deposition of Barry K. Lanier, the chief of the Department's Bureau of Investigation.

On February 26, 2008, this case was transferred to the undersigned. On that same date, the parties filed a joint

motion to continue the final hearing. The motion was granted, and the final hearing was rescheduled for March 13, 2008.

On March 5, 2008, Petitioner filed a response in opposition to the Department's motion for summary final order, which included an "Alternative Motion for Summary Final Order." Attached to Petitioner's filing was the deposition of William F. Reilly, Jr., the chief of OFR's Bureau of Securities Regulation.

On March 7, 2008, the final hearing was cancelled sua sponte to allow for orderly and reasoned consideration of the motions for summary final order.

On March 13, 2008, the Department filed its response to Petitioner's motion for summary final order. The response states that "[a]s this case is presently postured, it appears that both parties agree that this matter may be decided without an evidentiary hearing "2/

Due consideration has been given to the parties' filings.

No hearing is necessary.3/

FINDINGS OF FACT

1. Petitioner is an insurance salesperson licensed under Chapter 626, Florida Statutes.

2. Petitioner is the subject of an Administrative Complaint filed by the Department charging him with violations of various provisions of Chapter 626, Florida Statutes, in connection with his sale of viatical settlement contracts

   (viaticals) in 2002 and 2003. A final hearing in that case, DOAH Case No. 07-4701PL, was held on February 20, 2008, before Administrative Law Judge Chad C. Adams.

3. The petition in this case challenges four "agency statements relating to an administrative complaint filed against [Petitioner] (and in complaints against others similarly situated) as applied by the Department "

4. The challenged statements are summarized in the petition as follows:

   1. An unwritten policy statement that ownership interests in viatical settlement contracts sold in 2002 and 2003 are securities.

      
      

   2. An unwritten policy statement that ownership interests in viatical settlement contracts sold in 2002 and 2003 are required to be registered pursuant to Section 517.07, Florida Statutes.

      
      

   3. An unwritten policy statement that the Department defers to the Office of Financial Regulation in making decisions regarding whether viatical ownership interests are securities under Chapter 517, Florida Statutes.

      
      

   4. An unwritten policy statement that the Department will defers [sic] to another State of Florida agency, the Office of Financial Regulation, in deciding issues regarding viatical interests as securities under Chapter 517, Florida Statutes.

      
      

   5. The first two challenged statements are materially indistinguishable from statements challenged by Petitioner in

      DOAH Case No. 07-4746RU. The only difference is the addition of the words "[a]n unwritten policy statement that."

   6. The other two challenged agency statements were not challenged in DOAH Case No. 07-4746RU. According to the petition in this case, Petitioner first learned of these statements during the deposition of Barry Lanier. That deposition was taken in DOAH Case No. 07-4746RU on January 9, 2008.

   7. On January 25, 2008, Judge Adams entered a Summary Final Order in DOAH Case No. 07-4746RU, concluding that the statements challenged in that case are not rules because they were "pleadings within the Administrative Complaint intended to explain the interpretation provided by the agency concerning the meaning of provisions within Chapters 517 and 626, Florida Statutes, in effect when the alleged misconduct took place as described in the Administrative Complaint."

   8. The Summary Final Order explained that Petitioner would have the opportunity in DOAH Case No. 07-4701PL to pursue claims concerning the agency statements under Section 120.57(1)(e), Florida Statutes.

   9. On the same date that the Summary Final Order was entered, Judge Adams entered an Order striking the Third Affirmative Defense raised by Petitioner in DOAH Case

      No. 07-4701PL. That defense alleged that "[t]he Department's

      complaint is based in whole or part, upon 'agency statements' in violation of section 120.56(4), Florida Statutes, which have not been lawfully adopted pursuant to Section 120.54, Florida Statutes."

   10. The Order stated that it was entered "[w]ithout reference to Section 120.57(1)(e), Florida Statutes," because that statute was not mentioned in the affirmative defense, and the Order only precluded Petitioner from presenting the Third Affirmative Defense "as stated."

   11. Petitioner appealed the Summary Final Order in DOAH Case No. 07-4746RU to the First District Court of Appeal. The appeal is pending as Case No. 1D08-0581.

   12. The Department does not make the determination as to whether something is a security on its own; it defers to OFR when making the determination because OFR is the state agency responsible for regulatory activities relating to the securities industry.

   13. OFR and the Department make the determination as to whether something is a security on a case-by-case basis.4/

       CONCLUSIONS OF LAW

       
       

   14. DOAH has jurisdiction over the parties to and subject matter of this proceeding pursuant to Section 120.56(4), Florida Statutes.

   15. The scope of a proceeding under Section 120.56(4), Florida Statutes, is limited to determining whether the challenged agency statements are rules, and, if so, whether the agency's failure to adopt the statements in accordance with the formal rulemaking procedures is justified under Section 120.54(1)(a)1. or 2., Florida Statutes.

   16. The issues raised in the petition regarding the substantive validity of the challenged statements are beyond the scope of a proceeding under Section 120.56(4), Florida Statutes. Those issues can be litigated in the proceeding involving the application of the challenged statements. See § 120.57(1)(e), Fla. Stat.

   17. Section 120.56(4)(a), Florida Statutes, provides:

       
       

       Any person substantially affected by an agency statement may seek an administrative determination that the statement violates

       s. 120.54(1)(a). The petition shall include the text of the statement or a description of the statement and shall state with particularity facts sufficient to show that the statement constitutes a rule under

       s. 120.52 and that the agency has not adopted the statement by the rulemaking procedure provided by s. 120.54.

       
       

   18. Thus, to prevail in this proceeding, Petitioner must establish as a threshold matter that the challenged statements are rules, as defined by statute. See Dept. of Financial Services v. Capital Collateral Regional Counsel-Middle Region, 969 So. 2d 527, 530 (Fla. 1st DCA 2007) (hereafter "CCRC-M");

       Environmental Trust v. Dept. of Environmental Protection, 714 So. 2d 493, 498 (Fla. 1st DCA 1998).

   19. Section 120.52(15), Florida Statutes, defines "rule" to mean "each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency "

   20. A Summary Final Order is appropriate in this case because there is no genuine issue of material fact as to whether the challenged statements are rules. See § 120.57(1)(h), Fla. Stat. ("A summary final order shall be rendered if the administrative law judge determines from the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, that no genuine issue as to any material fact exists and that the moving party is entitled as a matter of law to the entry of a final order.").

   21. As explained in CCRC-M, a rule is an agency statement that requires compliance, creates certain rights, while adversely affecting others, or otherwise has the direct and consistent effect of law. See CCRC-M, 969 So. 2d at 530 (quoting Dept. of Revenue v. Vanjaria Enterprises, Inc.,

       675 So. 2d 252, 255 (Fla. 5th DCA 1996)). An agency statement that does not meet those criteria is not a rule.

   22. In determining whether an agency statement constitutes a rule, it is necessary to evaluate the statement's general

       applicability, requirement of compliance, and direct and consistent effect of law. See CCRC-M, 969 So. 2d at 530 (citing Volusia County School Board v. Volusia Home Builders Ass'n, Inc., 956 So. 2d 1084, 1089 (Fla. 5th DCA 2006)).

   23. Additionally, as explained in Environmental Trust:

       
       

       An agency statement explaining how an existing rule of general applicability will be applied in a particular set of facts is not itself a rule. If that were true, the agency would be forced to adopt a rule for every possible variation on a theme, and private entities could continuously attack the government for its failure to have a rule that precisely addresses the facts at issue. Instead, these matters are left for the adjudication process under section 120.57, Florida Statutes.

       
       

       Environmental Trust, 714 So. 2d at 498.

       
       

   24. The "unwritten policy statements" challenged by Petitioner in this case, like the statements in the report at issue in CCRC-M, are not self-executing or capable of granting or taking away rights of any person on their own.

   25. The alleged use of the "unwritten policy statements" as a basis for the Administrative Complaint filed against Petitioner did not convert the statements into rules; it only entitled Petitioner to a point-of-entry to challenge the Department's interpretation of its governing statutes through those statements as articulated in the Administrative Complaint.

       See CCRC-M, 969 So. 2d at 530-31. Petitioner has that opportunity in DOAH Case No. 07-4701PL.

   26. The depositions filed by the parties establish that the Department defers to OFR in determining whether something is a security and that the determination is made on a case-by-case basis. Thus, the challenged "unwritten policy statements" are not even statements of general applicability.

   27. Furthermore, the first two challenged statements are materially indistinguishable from the statements challenged by Petitioner in DOAH Case No. Case No. 07-4746RU. The addition of the words, "[a]n unwritten policy statement that," to the challenged statements does not change the fact that what Petitioner is challenging in this case is the Department's interpretation of the scope of its prosecutorial authority, just as he was in DOAH Case No. 07-4746RU. Petitioner is barred by the doctrines of res judicata and/or collateral estoppel from relitigating the same issue in this case. See generally Thomson v. Dept. of Environmental Reg., 511 So. 2d 989, 991 (Fla. 1987); Deep Lagoon Boat Club, Ltd. v. Sheridan, 784 So. 2d 1140, 1142

       n.4 (Fla. 2d DCA 2001); Holiday Inns, Inc. v. City of

       
       

       Jacksonville, 678 So. 2d 528, 529 (Fla. 1st DCA 1996).

       
       

   28. Petitioner is likewise barred from challenging the other two statements in this proceeding because, according to the petition, Petitioner became aware of the statements during

       discovery in DOAH Case No. 07-4746RU. Thus, Petitioner could have raised issues concerning those statements in the prior proceeding.

   29. Finally (or alternatively), dismissal of the petition is appropriate under United Wisconsin Life Insurance Company v. Department of Insurance, 831 So. 2d 239 (Fla. 1st DCA 2002).

   30. In United Wisconsin, the court affirmed the dismissal of a petition filed under Section 120.56(4), Florida Statutes. The court expressly held that the petitioner in that case had "no right to pursue a separate, collateral challenge to an alleged nonrule policy where an adequate remedy exists through a section 120.57 proceeding." United Wisconsin, 831 So. 2d

       at 240. The court explained that the petitioner "was free to make, and in fact did make, the same arguments raised in [the unadopted rule challenge] case in the then-pending section

       120.57 proceeding." Id.

       
       

   31. Like the petitioner in United Wisconsin, Petitioner has an adequate opportunity in DOAH Case No. 07-4701PL to litigate the precise issues framed by the petition in this case. Accord Kline v. Dept. of Financial Services, Case No. 07-5243RU, 2007 Fla. Div. Adm. Hear. LEXIS 665 (DOAH Dec. 6, 2007).

   32. Petitioner's argument that he does not have that opportunity appears to be based upon an erroneous reading of the Order striking the Third Affirmative Defense in DOAH Case

       No. 07-4701PL and/or the failure to read that Order in pari materia with the Summary Final Order in DOAH Case No. 07-4746RU.

   33. Accordingly, the following comments of the Administrative Law Judge in the DOAH case in United Wisconsin

are equally applicable in this case:

It seems unlikely that the Florida Legislature intended that allegations under a prohibitory or penal statute could be subject to collateral attack through a Section 120.54 [sic], Florida Statutes, rule challenge. Such a procedure could result in two hearings each time a regulatory action was brought by an agency. In the pursuit of justice through the administrative process, simplicity and economy of resources are primary goals. Permitting collateral challenges in enforcement cases unreasonably derogate those goals.

United Wisconsin Life Insurance Co. v. Dept. of Insurance,

Case No. 01-3135RU, 2001 Fla. Div. Adm. Hear. LEXIS 3204, at 66 (DOAH Nov. 27, 2001), aff'd, 831 So. 2d 239 (Fla. 1st DCA 2002).

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

ORDERED that:

1. The Department's Motion for Summary Final Order is granted.

2. Petitioner's Alternative Motion for Summary Final Order is denied.

3. The Petition to Determine Invalidity of Agency Statements is dismissed, and DOAH's file in this case is closed.

4. All requests for attorney's fees are denied.

DONE AND ORDERED this 20th day of March, 2008, in Tallahassee, Leon County, Florida.

S

T. KENT WETHERELL, II 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 20th day of March, 2008.

ENDNOTES

1/ All statutory references are to the 2007 version of the Florida Statutes.

2/ Petitioner stated in its response that "there are genuine issues of material fact in connection with this matter," but he did not clearly identify any factual disputes that warrant a hearing. For example, the response contends that "[t]he agency statements challenged in this proceeding are not the same as those involved in DOAH case 07-0746RU [sic]." A hearing is not necessary to make that determination; it can be made based upon the pleadings in the respective cases. To that end, official recognition is taken of the pleadings and Orders in DOAH Case Nos. 07-4746RU and 07-4701PL, which are referenced in the petition and throughout the filings in this case.

3/ On March 17, 2008, Petitioner filed a motion requesting oral argument on his motion for summary final order. On March 20,

2008, the Department filed an "objection" to the motion. The motion for oral argument is denied. See Fla. Admin. Code

1. 28-106.204(1) ("Written motions will normally be disposed of after the response period has expired, based on the motion, together with any supporting or opposing memoranda. The presiding officer shall conduct such proceedings and enter such orders as are deemed necessary to dispose of issues raised by the motion.").

   
   

   4/ The parties dispute whether the particular viaticals sold by Petitioner are securities. The Department contends that they have been determined to be securities, citing various administrative and judicial decisions; Petitioner contends that no such determination has been made, citing testimony in the depositions attached to the motions. This disputed issue of fact is the focus of DOAH Case No. 07-4701PL. It is not necessary to resolve the issue in this case to rule on the motions for summary final order because it is undisputed that the determination as to whether something--including the viaticals sold by Petitioner--is a security is made on a

   case-by-case basis.

   
   

   COPIES FURNISHED:

   
   

   H. Richard Bisbee, Esquire

   H. Richard Bisbee, P.A.

   1882 Capital Circle Northeast, Suite 206

   Tallahassee, Florida 32308

   
   

   David J. Busch, Esquire Department of Financial Services Division of Legal Services

   612 Larson Building

   200 East Gaines Street Tallahassee, Florida 32399-0333

   
   

   Honorable Alex Sink Chief Financial Officer

   Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

   Daniel Sumner, General Counsel Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307

   
   

   Scott Boyd, Executive Director and General Counsel

   Joint Administrative Procedures Committee

   120 Holland Building Tallahassee, Florida 32399-1300

   
   

   Liz Cloud, Program Administrator Bureau of Administrative Code Department of State

   1. Gray Building, Suite 101 Tallahassee, Florida 32399-0250

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: 08-000671RU

Orders for Case No: 08-000671RU