Findings Of Fact Based upon the record evidence, the following Findings of Fact are made: Petitioner sat for the certification examination for general contractors administered by the State of Florida in February, 1990. The examination consisted of two parts: GC121 and GC221. GC221 was comprised of 40 questions. Candidates were given four and one half hours to answer these 40 questions. This was an ample amount of time in which to complete the examination. Before the examination, candidates were given a list of reference materials and advised that the questions on the test would be taken from these sources. They were further advised that they would be permitted to bring these listed reference materials to the testing site and to use them in attempting to answer the examination questions. One of the reference materials listed was the "Builder's Guide to Accounting" by Michael Thomset. The "Builder's Guide to Accounting" has a section devoted to the subject of preparing a cash budget. The first three paragraphs of this section read as follows: A cash budget must reflect business realities, since you use it to chart the future course of your operation. If you have never used a budget before, start by estimating your immediate future cash income. Figure out as closely as possible the amount of incoming cash for the next month. Once you know this you can time your own expenses to the availability of these funds. Most businesses have had to budget this way out of necessity at one time or another. But effective cash budgeting does more than allow you to pay your bills. It puts you on a controlled course of financial action designed to achieve long-range goals. There are two principal methods of preparing a cash budget or forecast: the cash movement method and the source and application of funds method. Although there are other forecasting procedures, these two are commonly used because they are easy to prepare and at least as informative as any other method. The cash movement method involves budgeting only the flow of actual cash in and out of your business. Do not list additions to accounts receivable, as no cash changes hands in charge sales. And do not include liabilities. But make an estimate of payments on account. Estimate payments on account over several months, taking the amount of your charge sales from your total income budget. Budget taxes and loan payments as they become payable. This method is especially valuable for builders who have wide variations in their business volume from month to month. Such variations usually follow a predictable course. Building volume is affected by the seasons, zoning and political actions in your community, unusual weather patterns, the rate of community growth, and varying demands for the different types of work you do. Budgeting by the cash method allows you to handle directly cash flow changes that occur because of monthly volume variations. Figure 14-2 shows the form this budget should take. List each type of expected cash receipt and payment. This assures you that funds will be available to pay normal monthly expenses. Carry forward the amount at the end of the period on the last line to the beginning of the next period on the top line of the next column. Include in the cash budget the cost of any fixed assets you acquire, such as the $10,900 under Capital Assets. GC221-#21, the lone question in dispute in the instant case, is a multiple choice question that was drawn from the foregoing excerpt from the "Builder's Guide to Accounting." It is clear from a reading of that portion of the "Builder's Guide to Accounting" excerpted above that the only correct answer to GC221-#21 is (A). Petitioner chose another answer. Accordingly, he did not receive any credit for this question. Petitioner received a grade of 68.50 on GC221, .51 points shy of the grade that he needed to pass this part of the certification examination.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Construction Industry Licensing Board reject Petitioner's challenge to the failing score he received on the February, 1990, certification examination for general contractors. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of September, 1990. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 1990. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-4164 The following are the Hearing Officer's specific rulings on the findings of fact proposed by Respondent: 1. Accepted and incorporated in substance, although not necessarily repeated verbatim, in this Recommended Order. 2-4. Rejected because they are more in the nature of statements of the case than findings of fact. 5. First sentence: Rejected because it is more in the nature of a statement of the case than a finding of fact; Second, fourth and fifth sentences: Accepted and incorporated in substance; Third sentence: Rejected because it is more in the nature of a summary of testimony than a finding of fact based upon such testimony; Sixth and seventh sentences: Rejected because they constitute argument concerning the adequacy of Petitioner's proof rather than findings of fact. COPIES FURNISHED: Alan L. Arons, Esquire 1761 West Hillsboro Boulevard Suite 409 Deerfield Beach, Florida 33442-1502 Vytas J. Urba, Esquire Department of Professional Regulation 1940 North Monroe Street Suite 60 Tallahassee, Florida 32399-0750 Fred Seely, Executive Director Construction Industry Licensing Board Post Office Box 2 Jacksonville, Florida 32201
The Issue The issues in this case are the amount of attorney’s fees and costs to be awarded to Petitioners pursuant to Section 120.595, Florida Statutes (2007);1 whether Petitioners are entitled to fees and costs pursuant to Subsections 57.105(5), 120.569(2)(e), and 120.595(4), Florida Statutes; and, if so, what amount should be awarded.
Findings Of Fact Each of the 14 Petitioners filed separate rule challenges, challenging the validity of Florida Administrative Code Rule 64B16-26.2031 and challenging eight statements of policy of the Board of Pharmacy, which statements had not been adopted as rules. Prior to the filing of his or her rule challenge, each Petitioner had graduated from a pharmacy school located outside the United States and had taken and passed the Foreign Pharmacy Graduate Equivalency Examination, the Test of Spoken English, and the Test of English as a Foreign Language. Petitioners had been issued Intern Registrations by the Board of Pharmacy. All but two of the Petitioners had submitted an application to be admitted to the professional licensure examination. Those applications had been denied. All Petitioners, including the two Petitioners who had not submitted an application, had applied to the Board of Pharmacy for a variance or waiver to allow them to sit for the professional licensure examination. The Board of Pharmacy denied each Petitioner’s application for a variance or waiver. Each Petitioner had been represented by The Health Law Firm in their applications for a variance or waiver and wanted The Health Law Firm to continue to represent them in the rule challenge. When asked why the Petitioners had contacted The Health Law Firm to represent them, an attorney for The Health Law Firm stated: I think they have a network where word just gets around. And they-–I believe they even had some sort of list serve or Web site where they had all noted that they were being treated unfairly, and so they knew each other. And maybe our name got out on that or something. But they-–they all seemed to know each other-–seemed to know each other. Additionally, The Health Law Firm had sent out letters soliciting the foreign pharmacy graduates to join the rule challenge. An attorney for The Health Law Firm was not sure whether the letter had been posted on the web site for the foreign pharmacy graduates. In several of the invoices submitted by The Health Law Firm, there was a charge of $20.00 for a “[t]elephone conference with client’s colleagues who are in the same situation and interested in filing petitions for waivers and joining the rule challenge.”2 Thus, the circumstances surrounding the representation of Petitioners by The Health Law Firm do not demonstrate that it was a coincidence that Petitioners just happened to pick The Health Law Firm to represent them in the rule challenges. The Health Law Firm decided to file 14 separate petitions instead of one petition with 14 petitioners. The reason for the filing of the separate petitions was to increase the amount of attorney’s fees which could be awarded. Given the inexperience of attorneys at The Health Law Firm with rule challenges and the difficulty in understanding the speech of Petitioners, who received their pharmacy training in countries other than the United States, The Health Law Firm felt that it was not economically feasible to pursue the rule challenge for $15,000.00. Petitioners had a common goal, i.e. to be allowed to sit for the professional licensure examination. The wording of each of the petitions was essentially the same except for the names of the individual Petitioners. Because the issues were the same for all the rule challenges, the rule challenges were consolidated for final hearing. No final hearing was held in the consolidated cases. The parties agreed that, based on the parties’ Joint Pre-hearing Stipulation, there were no disputed issues of material fact and agreed to file proposed final orders addressing each party’s position regarding the application of the law to the stipulated facts. The Board of Pharmacy conceded that Florida Administrative Code Rule 64B16-26.2031 was an invalid exercise of delegated legislative authority, and Petitioners were determined to prevail on the issue of the invalidity of the existing rule. On the challenge to the Board of Pharmacy’s policy statements, four statements were determined to meet the definition of a rule. The Board of Pharmacy conceded in the parties’ pre-hearing stipulation that the instructions in the Foreign Pharmacy Graduate Application for Licensure by Examination, directing applicants not to apply prior to obtaining all the required internship hours, constituted a non-rule policy. On August 1, 2008, in response to its concession that some of the statements or policies at issue were invalid non-rule policies, the Board of Pharmacy had published, in the Florida Administrative Law Weekly, a Notice of Rule Development for Florida Administrative Code Rule 64B16-26.2031. On August 21, 2008, the Board of Pharmacy approved changes to Florida Administrative Code Rule 64B16- 26.2031, eliminating the Foreign Pharmacy Graduate Examination Committee (FPGEC) requirement, incorporating by reference the Foreign Graduate Examination Application, and stating the time frames for the application of Florida Administrative Code Rule 64B16-26.2031. Pursuant to Subsection 120.56(4)(e), Florida Statutes, the portion of the petitions dealing with the statements on which the Board of Pharmacy did not prevail was abated pending the rulemaking process. Petitioners did not prevail on four of the policy statements they challenged. These were the policy statements which the Board of Pharmacy contested. Based on the invoices submitted, the parties attempted to settle the case. Essentially, the Board of Pharmacy had started rule development which eliminated the requirement in the existing rule which caused it to be invalid and which dealt with the unpromulgated rule issues that the Board of Pharmacy had conceded in the Joint Pre-hearing Stipulation. Petitioners wanted to be able to sit for the National Association of Pharmacy Licensure Examination (NAPLEX) and the Multistate Pharmacy Jurisprudence Examination (MPJE). All Petitioners who had a Foreign Pharmacy Graduate Application for Licensure by Examination pending on August 21, 2008, were approved by the Board of Pharmacy to sit for the NAPLEX and the Florida version of the MPJE. Thus, by August 21, 2008, those Petitioners had reached their goal. The impediment to settling the cases was the amount of attorney’s fees that should be awarded to Petitioners. There was no undue delay by the Board of Pharmacy or anything which could be attributed to the Board of Pharmacy as needlessly increasing the cost of litigation. The Board of Pharmacy correctly contended that the amount of fees requested by Petitioners was unreasonable. The Partial Final Order entered in the underlying rule challenges held that Petitioners are entitled to an award of attorney’s fees and costs pursuant to Subsection 120.595(3), Florida Statutes. The Board of Pharmacy was not substantially justified in promulgating the challenged rule in the underlying case and did not demonstrate that special circumstances existed to warrant the promulgation of the challenged rule. The Board of Pharmacy did not demonstrate that the statements which constituted unpromulgated rules are required by the Federal Government to implement or retain a delegated or approved program or to meet a condition to receipt of federal funds. Each Petitioner entered into a contingency fee contract3 with The Health Law Firm to represent him or her in a rule challenge. The parties have agreed that the hourly rate of $350.00 per hour for the services of George F. Indest, III, Esquire, is reasonable and fair under the circumstances. The parties have agreed that some of the hourly rates being claimed for the other attorneys and employees of The Health Law Firm are reasonable and fair under the circumstances. Those fees are $200.00 and $150.00 per hour for the associate attorneys, $80.00 per hour for the paralegals, and $70.00 per hour for the legal assistants. There were a few entries in the invoices made by senior attorneys for whom the rate charged is $300.00 per hour. Based on the rates charged for the senior partner and the associate attorneys, an hourly rate of $300.00 for a senior attorney is reasonable. The names of the attorneys and staff and the respective hourly rate amount for each are listed below. In discussing the reasonableness of the fees claimed in the various invoices, the attorneys and staff will be referred to by their initials as listed in the invoices. Initials Name Hourly Rate GFI George F. Indest, III, Senior Partner $350.00 MLS Michael L. Smith, Senior Attorney $300.00 JK Joanne Kenna, Senior Attorney $300.00 TJJ Teresa J. James, Attorney $200.00 MRG Matthew R. Gross, Attorney $150.00 JP Justin Patrou, Law Clerk $100.00 GJ Gail Joshua, Senior Paralegal $80.00 PD Pamela Dumas, Litigation Clerk $80.00 SF Sandra Faiella, Paralegal $80.00 RS Rebecca Simmons, Paralegal $80.00 AE Alexa Eastwood, Legal Assistant $70.00 SE Shelly Estes, Legal Assistant $70.00 The amount of fees claimed by each Petitioner for representation by The Health Law Firm for the rule challenge is listed below. These amounts are based on the individual invoices and the first consolidated invoice:4 Name Amount Vipul Patel $15,212.36 Miriam Hernandez $15,683.36 Mirley Aleman-Alejo $11,469.36 Valliammai Natarajan $5,074.36 John H. Neamatalla $11,215.36 Samad Mridha $13,650.36 Se Young Yoon $12,292.36 Saurin Modi $10,093.36 Deepakkumar Shah, M.Ph. $11,764.36 Mijeong Chang $12,528.36 Nabil Khalil $10,272.36 Hadya Alameddine $5,313.36 Balaji Lakshminarayanan $4,585.36 Anand Narayanan $4,218.36 Total $143,372.04 Sandra Ambrose testified as an expert witness on behalf of Petitioners. Her opinion is that the amounts claimed are based on a reasonable number of hours expended in the litigation of the rule challenge. However, Ms. Ambrose has never represented a client in a rule challenge. It was Ms. Ambrose’s opinion that the difficulty in the cases was a result of the number of Petitioners not the issues to be litigated. Having reviewed all the invoices submitted in these cases, the undersigned cannot credit Ms. Ambrose’s testimony that the fees are reasonable. The Board of Pharmacy argues that the amount of fees and costs should be limited to the amount expended in the petition brought by the first Petitioner, Vipul Patel. The expert who testified for the Board of Pharmacy did not give a definite amount that he considered to be a reasonable fee in these cases. Prior to the final consolidation of all 14 rule challenges, The Health Law Firm invoiced for its services and costs by individual Petitioner. After all 14 rule challenges were consolidated, The Health Law Firm invoiced for its time and costs via a consolidated invoice. The undersigned has painstakingly reviewed all the invoices that were submitted to support Petitioners’ claims for fees and costs in the rule challenges and finds the fees requested are not reasonable. On May 15, 2008, the invoices for Case Nos. 08-2733RX contained the following entry for MRG. “Review/analyze final order. Strategize regarding final order.” The final order appears to be related to a petition5 for a waiver or variance before the Board of Pharmacy, and the entry is deleted. This conclusion is supported by the entry in the invoice dated May 29, 2008, relating to a telephone conference with the client relating to a re-petition for waiver. In Case No. 08-2730RX, there is an entry on May 27, 2008, for .10 hours for MRG, but no service is listed. That entry is deleted. On June 6, 2008, MRG entered .50 hours each in Case Nos. 08-2728RX, 08-2729RX, 08-2732RX, 08-2733RX, 08-2734RX, 08-2821RX, 08-2823RX, 08-2824RX, and 08-3298RX. The entry stated: “Continue preparing rule challenge and waiver.” The Health Law Firm represented the Petitioners in four of these cases before the Board of Pharmacy on June 10, 2008, on their petitions for a wavier or variance. The invoice does not delineate the amount of time that was spent on the rule challenge and the amount of time that was spent on the waiver cases. Therefore, the time is divided equally and .25 hours in each case is charged toward the rule challenge. 23. On June 9, 2008, in Case Nos. 08-2733RX, 08-2730RX, 08-2731RX, 08-2734RX, 08-2729RX, and 08-2732RX, the senior partner of The Health Law Firm entered .30 hours for each case, which stated: “Prepare letter to Division of Administrative Hearings forwarding Petition for Rule Challenge to be filed.” The letter which accompanied the petitions in these cases stated: Dear Clerk: Attached for filing, please find a separate Petition to Determine the Invalidity of an Existing Agency Rule and the Invalidity of Agency Policy and Statements defined as Rules, for each of the individuals listed below: Miriam L. Hernandez Mirley Aleman-Alejo Se Young Yoon John H. Neamatalla Valliammai Natarajan Md. A. Samad Mridha Thank you for your assistance in this matter. For this letter, Petitioners are claiming 1.8 hours or $630.00. This is not reasonable. On the same date, GFI prepared a similar transmittal letter in Case No. 08-2728RX and listed .3 hours, which is a reasonable amount for the preparation of such a letter. Thus, the preparation of the transmittal letter on June 9th for Case Nos. 08-2733RX, 08-2730RX, 08-2731RX, 08-2734RX, 08-2729RX, and 08-2732RX is reduced to .3 hours, which is prorated to .05 hours for those cases. The senior partner in The Health Law Firm claims 23.6 hours during June 3 through 5, 2008, for the following service which was entered on the invoices for Case Nos. 08-2730RX, 08-2729RX, 08-2731RX, 08-2823RX, 08-3298RX, 08-2821RX, 08-2728RX, 08-2734RX, 08-2733RX, and 08-2824RX. Conduct legal research, review statutes, cases (approximately 28 cases reviewed and analyzed) and two (2) different Florida Administrative Law legal treatises regarding rule challenges and challenging agency statements not adopted as rules, in order to properly prepare Petition for Formal Rule Challenge in case. Research legal issues including administrative agency rules exceeding authority granted in statutes, retroactive applications of agency rules, adding requirements to licensure requirements through administrative rules when those requirements are not contained in the statute. Review Rules of Procedure and Chapter 120 to determine contents of Rule Challenge Petition. Begin reviewing and revising draft for Rule Challenge in case. (Note: Only pro-rata portion of this time charged to each case.) The total amount of fees claimed for this research is $8,260.00. GFI testified that he had never done a rule challenge prior to filing the petitions in the instant cases. His fees for research due to his lack of knowledge of the basics of a rule challenge should not be assessed against the Board of Pharmacy. A reasonable amount of time for his research is four hours. Thus, the amount for this legal research prorated among the ten cases for which it was listed is .4 hours. On July 19, 2008, the senior partner of The Health Law Firm entered .60 hours in ten of the rule challenges for reviewing the Transcripts of the Board of Pharmacy meetings for February 8 and April 5, 2008, and preparing a notice of filing the Transcripts with the Division of Administrative Hearings. Six hours to review the Transcripts and prepare a notice of filing is not reasonable. Three hours is determined to be a reasonable amount of time for this task, and that amount is prorated among the ten cases in which the charge was made. On June 10, 2008, members of The Health Law Firm attended a Board of Pharmacy meeting at which they represented foreign pharmacy graduates who had petitioned the Board of Pharmacy for a waiver or variance. In Case Nos. 08-2821RX, 08-3298RX, and 08-2733RX, the senior partner listed .90 hours for each case for preparation for the June 10th Board of Pharmacy meeting. The preparation related to the petitions for variances or waivers and should not be assessed for the instant cases. For June 10, 2008, JP listed .70 hours each in Case Nos. 08-2823RX, 08-2732RX, 08-2821RX, and 08-2733RX for attendance at the Board of Pharmacy meeting. For June 10, 2008, GFI entered 1.4 hours for attendance at the Board of Pharmacy meeting. The entries for attending the Board of Pharmacy meeting related to the petitions for waivers and should not be assessed in the instant cases. For June 19, 2008, the senior partner made the following entry in the invoices for Case Nos. 08-2728RX, 08-2729RX, 08-2732RX, 08-2733RX, 08-2734RX, 08-2821RX, 08-2823RX, and 08-2824RX: Travel to Boca Raton to meet with other health care lawyers and discuss issues in common on these cases and others. Discuss legal strategies that worked in the past and legal strategies to be avoided. Return from Boca Raton. Each entry was for one hour, for a total of eight hours claimed for a trip to Boca Raton, which equates to $2,880.00. Based on the entry, it seems that the trip included discussions of other cases that The Health Law Firm was handling or that other attorneys were handling. Additionally, there was no rationale for having to travel to Boca Raton to discuss the issues, and fees for such travel should not be awarded. A reasonable amount of time for discussion of the case with other attorneys by telephone would be .80 hours. The prorated amount of time for each case listed is .10 hours. On May 27, 2008, SF made a .30-hour entry in Case No. 08-2824RX for reviewing the agenda of the June 10th Board of Pharmacy meeting as it related to the client in Case No. 08-2824RX. The entry related to the client’s petition for a waiver, which was heard at the June 10th meeting and should be deleted. On May 30, 2008, in Case No. 08-2824RX, SF made a .40-hour entry for drafting a letter to client with retainer agreement. The entry is clerical and should be deleted. On June 18, 2008, an entry was made in the invoice in Case No. 08-2731RX, which stated: “Telephone call from husband of our client indicating that they want us to close this matter and that they do not wish to pursue it any further; follow-up memorandum to Mr. Indest regarding this.” Charges continued to be made to the client through July 16, 2008. Based on the entry to the invoice on June 18, 2008, no further charges should have been made to the client except for the filing of a voluntary dismissal of the rule challenge for the client. However, no voluntary dismissal was filed. Based on the absence of any further charges to the client after July 18, 2008, it is concluded that the client did wish not to proceed with her rule challenge. Any charges by The Health Law Firm after June 18, 2008, in Case No. 08-2731RX will not be assessed against the Board of Pharmacy as it relates to the rule challenge. On June 19, 2008, TJJ made the following .10-hour entry in ten of the cases: “Review June 10, 2008, Board of Pharmacy Agenda. Telephone conference with Court Reporter, Ms. Green, ordering transcript of the June 10, 2008, meeting.” An hour for reviewing an agenda and ordering a transcript is not reasonable. A reasonable amount of time is .40 hours, and such time is prorated to the ten cases in which it is charged. 33. On June 20, 2008, in Case Nos. 08-2823RX and 08-2824RX, TJJ made a .80-hour entry which stated: “Prepare draft motion for consolidation.” No motion was ever filed and would not have been necessary since the parties had agreed at the pre-hearing conference that the rule challenges would be consolidated. The time for this service should be deleted. 34. On July 10, 2008, TJJ made the following .10-hour entry in several of the cases: “Review prehearing instruction orders and amended orders to determine respondent’s deadline to serve discovery responses.” The entry is duplicative of services provided by MRG on July 8, 2008, and should be deleted. 35. On July 15, 2008, in Case Nos. 08-2729RX, 08-2728RX, 08-2730RX, 08-2732RX, 08-2733RX, 08-2734RX, 08-2821RX, 08-2823RX, 08-2824RX, and 08-3298RX, TJJ had .40 hours for a total of 4.00 hours for the following entry: Prepare Petitioners’ Motion to Compel Discovery and assemble and copy documents to be attached to Motion. Prepare facsimile coversheets and transmit the Motion to the attorney for the Board of Pharmacy, Ms. Loucks, and to the clerk for the Division of Administrative Hearings. The copying, preparing facsimile coversheets, and transmitting the motion are clerical tasks. The entries are reduced to .20 hours due to the clerical nature of the tasks, which leaves a total of two hours for preparing a simple motion to compel. The time for the preparation of the motion to compel is not reasonable and is reduced to .10-hour for each entry. On July 22, 2008, the last Order consolidating all the cases was filed. The Order consisted of four paragraphs. On July 29, 2008, TJJ entered .10 hours in Case Nos. 08-2733RX, 08- 2730RX, 08-2734RX, 08-2728RX, 08-2729RX, 08-2732RX, 08-2824RX, 08-3510RX, 08-3488RX, 08-3347RX, 08-2823RX, 08-3298RX, and 08- 2821RX, and each entry stated: “Review order of consolidation filed on July 22, 2008, for common information needed for all cases.” Thus, Petitioners are claiming a total of 1.3 hours or $260.00 to review a four-paragraph Order of Consolidation. This claim is not reasonable. A reasonable amount of time to review the Order was .10 hours, and the time shall be prorated among the cases for which it was claimed at .08 hours each. On July 24, 2008, TJJ made an entry of .10 hours in ten of the cases which stated: Telephone conference with the clerk of the District Court of Appeal, First District to find out the start time of oral arguments on Custom Mobility (rule challenge case). Request information from clerk regarding how to listen to oral arguments online. Observing this oral argument will allow us to better prepare our case for possible appeal. First, a one-hour telephone conversation with the Clerk of District Court of Appeal to ascertain the time for an oral argument and to learn how to listen to oral arguments online is not reasonable. Second, it is not reasonable to charge the Board of Pharmacy with a call to the District Court of Appeal in the instant cases, even if the amount of time for the call had been reasonable. The one-hour charge for $200.00 for a telephone call is deleted. On July 30, 2008, TJJ made an entry of .10 hours in 13 of the rule challenges. The entry stated: “Listen to oral arguments presented before District Court of Appeals, First District, in Custom Mobility case (rule challenge case).” The oral argument was not related to the instant rule challenges and should not be charged to the Board of Pharmacy. The 1.3 hours or $260.00 claim for listening to an oral argument is deleted. On August 4, 2008, TJJ made the following .10-hour entry in 13 of the cases: “Review Joint Motion for Abeyance and Order Canceling Hearing and Placing Cases in Abeyance. Calendar deadlines regarding same.” The time of 1.3 hours for reviewing the simple motion and Order is not reasonable. Calendaring is a clerical task. The time for this service is reduced to .01 hours for each entry. On August 5, 2008, TJJ made the following .10-hour entry in 13 of the cases: “Review Respondent’s Objections and Responses to Petitioners’ Second Set of Interrogatories and Respondent’s Objections to Petitioners’ Second Set of Requests for Admissions.” The objections were that the interrogatories and requests for admissions exceeded 30. The time of 1.3 hours for reviewing the pleadings is not reasonable. The time for this service is reduced to .04 for each entry. Petitioners had scheduled the depositions of Rebecca Poston and Daisy King for July 18, 2008. On July 17, 2008, Petitioners filed notices canceling the depositions. On July 17, 2008, PD entered .10 hours in ten of the rule challenges for the following entry: Telephone conference with Accurate Stenotype Reporters regarding cancellation of depositions of Daisy King and Rebecca Poston on July 18, 2008 and delay transcription of depositions of Erika Lilja and Elizabeth Ranne due to potential settlement. It is not reasonable to charge an hour to cancel depositions with the court reporter. A reasonable amount of time would be .10 hours, which is prorated to the ten cases to which it is charged. PD prepared the notice of the canceling of the deposition of Ms. Poston and the notice of the canceling of the deposition of Ms. King. Entries were made in ten of the cases for time for preparing the notices. The total time for preparing the two notices by PD was 1.45 hours. The time is not reasonable. A reasonable time to prepare two notices of canceling depositions would be .40 hours, which is prorated among the ten cases in which it was charged. One of the issues on which Petitioners did not prevail in the rule challenges was the issue of retroactive application of the rule. There are entries totaling 3.4 hours for JP for preparation of a memorandum dealing with the retroactive application of a rule issue. GFI entered .30 hours for the same issue. The time relating to the retroactive application issue is deleted. On April 19, 2008, MRG entered .20 hours each in several cases, which related to the rule challenge and retroactive application issue. That time is reduced by half. On May 6, 2008, MRG made .60-hour entries in Case Nos. 08-2728RX, 08-2729RX, 08-2730RX, 08-2732RX, 08-2733RX, 08-2734RX, 08-2821RX, 08-2823RX, 08-2824RX, and 08-3298RX, which showed the preparation of three sections of the petition. One of the sections dealt with the retroactive application issue, and the entries are reduced by .20 hours for that issue. The invoices demonstrated that a considerable amount of time was charged for legal assistants and paralegals. Much of this time was for clerical tasks. SE is identified in Petitioners’ exhibits as a legal assistant. The majority of the entries by SE dealt with the photocopying, labeling, organizing, indexing, and filing documents. These services performed by SE are clerical and, as such, cannot be included in an award of attorney’s fees. RS is identified in Petitioners’ exhibits as a paralegal/legal assistant. The majority of the entries in the invoices for RS deal with receiving, reviewing, labeling, indexing, scanning, summarizing, and calendaring pleadings and orders that were received in the cases. These services are clerical and, as such, cannot be included in an award of attorney’s fees. Petitioners in Case Nos. 08-2728RX, 08-2732RX, and 08-2733RX each claimed .30 hours for RS for the following service on April 30, 2008: Received and reviewed letter from Department of Health regarding our Public Records Request dated April 28, 2008 relating to client’s case. Index document for filing and scanning for use of attorneys at hearing. However, .90 hours for reviewing and indexing a letter is not reasonable and is clerical in nature. On June 17, 2008, in Case No. 08-2730RX, RS entered .60 hours for preparing, copying, and sending a letter to the client forwarding a copy of the Order of Assignment. That entry is reduced to .30 hours, since at least half of the time appeared to be for clerical tasks. AE, who is identified as a legal assistant in Petitioners’ exhibits, has numerous entries in the invoices for receiving, indexing, filing, calendaring, and providing pleadings and orders to clients. Those services are clerical and, as such, cannot be included in an award of attorney’s fees. In Case No. 08-2728RX, PD, identified in Petitioners’ exhibits as a paralegal, made entries on June 16 and June 25, 2008, for .30 hours each. These entries were to update the litigation schedule with the hearing date. The entry is clerical and, as such, cannot be included in an award of attorney’s fees. SF, who is identified in Petitioners’ exhibits as a paralegal/legal assistant, made an entry for .30 hours in Case No. 08-2728RX on June 26, 2008, and in Case No. 08-2732RX on June 11, 2008, for forwarding orders to the client. An entry was made on July 10, 2008, in Case No. 08-2728RX and on June 18, 2008, in Case No. 08-2730RX for .30 hours for processing the retainer package. Additionally, SF had entries for organizing and filing transcripts and orders. Such services are clerical and, as such, cannot be included in an award of attorney’s fees. In Case No. 08-3488RX, SF made a .30-hour entry on June 30, 2008, for updating the parties list and document file and a .50-hour entry on June 26, 2008, for completing opening procedures. In the same case, SF made two entries on July 7, 2008, for a total of 1.5 hours for preparing a retainer package and sending it to the client. These tasks are clerical. On June 24, 2008, SF made the following .30-hour entry in 11 of the cases: “Finalize and forward Joint Motion for Continuance of Final Hearing to client in this matter.” These entries are deleted; as they represent clerical tasks and an unreasonable amount of time to finalize a motion for continuance for which GFI had charged 1.1 hours for preparing the motion. In several cases JP, identified as a law clerk, made entries on July 15, 2008, for .30-hour for creating, numbering, and copying exhibits. Such service is clerical. On July 30, 2008, PD made the following .20-hour entry in 13 of the cases: Prepare Petitioners’ Notice of Service of Second Set of Interrogatories and Certificate of Filing and Service. Prepare correspondence to Debra Loucks, attorney for Board of Pharmacy regarding filing and Service of Petitioners’ Fourth Set of Request to Produce and Second Set of Interrogatories. However, 2.6 hours is not a reasonable amount of time to prepare a notice of service of discovery and a transmittal letter to opposing counsel. A reasonable amount of time to prepare such documents is .50 hours, and the time is prorated among the 13 cases. On July 28, 2008, PD made the following .10-hour entry in 13 of the cases: Prepare Notice of Filing Videotaped Depositions of Elizabeth Ranne and Erika Lilja. Prepare draft of Notice of Filing Deposition Transcript of Elizabeth Ranne. However, 1.3 hours is an unreasonable amount of time to prepare two notices of filing depositions. A reasonable amount of time is .40 hours, and that amount is prorated among the 13 cases. On June 17, 2008, PD made the following .20-hour entry in each of the 11 cases: Prepare Petitioners’ Notice of Service of First Set of Interrogatories to Respondent and Certificate of Filing and Service. Prepare correspondence to Debra Loucks, attorney for Board of Pharmacy, regarding filing and service of Petitioners’ First Set of Request to Produce, Petitioners’ First Set of Request for Admissions and Petitioners’ First Set of Interrogatories. However, 2.2 hours is an unreasonable amount of time to prepare a notice of service of discovery and a transmittal letter to opposing counsel. A reasonable amount of time is .50, which is prorated among the 11 cases. 58. On June 21, 2008, in Case Nos. 08-2821RX, 08-2823RX, and 08-2824RX, there is a .30-hour entry for SF for finalizing and forwarding a petition for formal hearing to the Department of Health for filing. This entry does not appear to be related to the rule challenges and is deleted. In Case No. 08-3298RX, MRG made an entry of .50 hours for a telephone conference regarding the date of rule challenge and petition for rehearing. The petition for rehearing dealt with the client’s petition for waiver and should not be included. Thus, the entry is reduced to .25 hours. After all the cases were consolidated The Health Law Firm began to make entries for all cases in the first consolidated invoice. On July 28, 2008, GFI made an entry of 2.8 hours, which related exclusively to the issue of retroactive application of the rule. This entry is deleted. RS made entries in the first consolidated invoice for August 12, 14, 28, and 29, 2008, and September 2, 5, 10, and 18, 2008, relating to filing, indexing, copying, and forwarding documents. There are similar entries for SF on August 26, 2008, and September 4 and 9, 2008, and for AE on September 8, 2008. Those entries are for clerical tasks. PD had entries for reviewing, organizing, and indexing documents on September 4, 8, 11, and 17, 2008, and October 8, 2008. Those entries are for clerical tasks. There were numerous entries in August 2008 relating to a Board of Pharmacy meeting on August 21, 2008, in which the Board of Pharmacy heard motions for reconsideration of orders denying Petitioners’ petitions for waivers. Those entries are related to the petitions for waiver and not to the rule challenges. Although, The Health Law Firm makes reference to a settlement agreement in which the Board of Pharmacy agreed to grant the waivers, there was no settlement agreement of the rule challenges because the parties proceeded to litigate the issues by summary disposition. Thus, the references to attending and preparing for the August 21, 2008, Board of Pharmacy meeting as well as advising the clients of the outcome of the meeting on August 20 and 21, 2008, are deleted. Additionally, an entry by MRG on August 20, 2008, which included reviewing the August 21st agenda is reduced to .75 hours. On August 25, 2008, MRG made an entry which included a telephone conference with Mr. Bui and a telephone conference with Ms. Ranne regarding Mr. Bui. Mr. Bui is not a Petitioner, and the entry is reduced to .55 hours. Based on the invoices, it appears that Mr. Bui and Ms. Ranne were also foreign pharmacy graduates seeking waivers from the Board of Pharmacy. On August 29, 2008, MRG made another entry which included the preparation of an e-mail to Mr. Bui. The entry is reduced to two hours. On August 6, 2008, MRG made a 1.80-hour entry which included preparing e-mail to Mr. Bui and a telephone conference with Mr. Sokkan regarding the rule challenge and settlement negotiations. Neither of these persons is a Petitioner; thus, the entry is reduced to .60 hours. On August 28, 2008, TJJ made a 3.60-hour entry for researching and preparing Petitioners’ second motion to compel discovery. No such motion was filed. Thus, the entry is deleted. Another entry was made on September 2, 2008, which included, among other things, the revision of the motion to compel. That entry is reduced to .80 hours. On August 8, 2008, MRG made a 1.00-hour entry which included a telephone conference with Ms. Alameddine regarding her passing the MPJE and being licensed in Michigan. Those issues relate to the petition for reconsideration of the waiver. The entry is reduced to .50 hours. On September 4, 2008, TJJ made a .80-hour entry for preparing a letter to Mr. Modi regarding his approval to take the examination, a 1.00-hour entry dealing with Mr. Lakshminarary’s application, a .90-hour entry dealing with Petitioner Narayanan’s application, a .70-hour entry dealing with Mr. Shah’s application, and a .60-hour entry dealing with Ms. Hernandez’s application. The entries deal with the petitions for a waiver and are deleted. On September 4, 2008, MRG made an entry which included, among other tasks, time for determining if the Board of Pharmacy had sufficient funds to pay Petitioners’ attorney’s fees. This entry is reduced to two hours. On October 10, 2008, MRG made a 1.20-hour entry which included, among other things, analyzing pleadings to determine if persons who were not Petitioners should file petitions for attorney’s fees. The entry is reduced to .60 hours. On July 16, 2008, MRG and JP made entries in ten of the cases for traveling to Tallahassee and attending the depositions of Elizabeth Ranne and Erika Lilja. The total hours for MRG was 16.9 hours and for JP the total was 17 hours. These total hours are reduced by ten hours each for travel time. On August 12 and 13, 2008, MRG made entries which included travel time to attend Board of Pharmacy meetings.6 Those entries are reduced each by one hour to account for travel time. The following is a listing of the amount of hours and dollar amount for fees, which are considered to be reasonable for the rule challenges. Individual and First Consolidated Invoice Hours Rate Amount GFI 146.10 $350.00 $51,135.00 MLS 3.70 $300.00 $1,110.00 JK 1.40 $300.00 $420.00 TJJ 80.13 $200.00 $16,026.00 MRG 210.16 $150.00 $31,824.00 JP 37.80 $100.00 $3,780.00 PD 39.053 $80.00 $3,124.24 SF 16.80 $80.00 $1,344.00 GJ .40 $80.00 $32.00 RS 1.3 $80.00 $104.00 $108,899.24 The Partial Final Order found that Petitioners were entitled to an award of attorney’s fees pursuant to Subsection 120.595(3), Florida Statutes. Thus, the issue of entitlement to fees and costs pursuant to Subsection 120.595(3), Florida Statutes, was not an issue that was litigated in the instant fee cases. The issue of whether Petitioners were entitled to fees and costs pursuant to Subsections 57.105(5), 120.569(2)(e), and 120.595(4), Florida Statutes, were entitlement issues which were litigated in the instant fee cases.7 Most of the charges dealing with the petitions for fees and costs are related to the amount of fees that are to be awarded and not to the entitlement to fees. In Petitioners’ second consolidated invoice (Petitioners’ Exhibit 4), there is a two-hour entry by MLS on November 3, 2008, for research of entitlement to fees pursuant to Subsection 120.595(3), Florida Statutes. This entry is deleted since the issue of entitlement to fees pursuant to Subsection 120.595(3), Florida Statutes, had already been determined. The following entries in the second consolidated invoice relate to the litigation of the amount of fees to be awarded and are deleted: 11-5-08 GFI 6.90 hours 11-6-08 SF 7.00 hours 11-6-08 GFI 7.40 hours 11-7-08 SF 7.00 hours 11-7-08 MLS 1.00 hour 11-7-08 JCP 7.00 hours 11-8-08 JCP 1.00 hours 11-8-08 GFI 7.10 hours 1-26-09 GFI 1.00 hour 2-9-09 GFI .60 hours 2-10-09 GFI .30 hours 2-12-09 GFI .60 hours 2-17-09 GFI .30 hours 2-17-09 GFI .60 hours 2-19-09 GFI .60 hours The following entries were made in the second consolidated invoice for clerical tasks performed by paralegals and legal assistants: 11-3-08 RAS .30 hours 2-9-09 RAS .30 hours 2-10-09 RAS .30 hours 2-12-09 ACE .40 hours The issue of entitlement to fees pursuant to statutes other than Subsection 120.595(3), Florida Statutes, was a small portion of the litigation relating to attorney’s fees and costs. The major areas of litigation dealt with the amount of fees and costs that should be awarded. The invoices do not specifically set forth the amount of time that was spent on the issue of entitlement to fees on statutes other than Subsection 120.595(3), Florida Statutes. Based on a review of the pleadings in these fee cases and a review of the invoices submitted for litigation of attorney’s fees and costs, it is concluded that ten percent of the time should be allocated to the issue of entitlement to fees. The percentage is applied to the fees after the fees listed in paragraphs 76, 77, and 78, above, have been deleted. Thus, the following entries in the second consolidated invoice are reduced to the following amount of hours: 11-1-08 JCP .26 hours 11-3-08 MLS .10 hours 11-4-08 MLS .40 hours 11-8-08 JCP .32 hours 12-22-08 GFI .04 hours 12-30-08 MLS .03 hours 1-7-09 GFI .02 hours 1-14-09 GFI .04 hours 1-15-09 GFI .07 hours In the third consolidated invoice (Petitioners’ Exhibit 5), the following entries relate to the amount of fees to be awarded and are deleted: 3-4-09 SME 4.80 hours 3-4-09 GFI 1.20 hours 4-3-09 GFI 3.20 hours 4-7-09 GFI .50 hours 4-7-09 GFI .60 hours 4-7-09 GFI .30 hours 4-8-09 GFI 4.20 hours 4-8-09 GFI 1.00 hour 4-9-09 MRG 1.50 hours 4-9-09 GFI 3.20 hours 4-11-09 GFI .60 hours 4-15-09 GFI 4.40 hours On April 14, 2009, GFI made an entry which included time for travel to the expert witness’ office. The entry is reduced by .75 hours for travel time. Ten percent of the time not excluded or reduced above related to the issue of entitlement of fees pursuant to statutes other than Subsection 120.595(3), Florida Statutes. The following entries are reduced to that percentage: 3-31-09 GFI .05 hours 4-1-09 GFI .20 hours 4-6-09 GFI .19 hours 4-6-09 GFI .03 hours 4-7-09 MRG .05 hours 4-7-09 GFI .07 hours 4-7-09 GFI .19 hours 4-7-09 GFI .27 hours 4-9-09 GFI .10 hours 4-13-09 GFI .50 hours 4-14-09 GFI .48 hours 4-14-09 GFI .275 hours The following is a list of the fees in the second and third consolidated invoices which are related to entitlement of fees pursuant to Florida Statutes other than Subsection 120.595(3), Florida Statutes. Second and Third Consolidated Invoice Hours Rate Amount GFI 2.525 $350.00 $883.75 MLS .43 $300.00 $129.00 MRG .05 $150.00 $7.50 JCP .32 $100.00 $32.00 $1,052.25 With the exception of the costs related to the Transcripts of the Board of Pharmacy meetings of April 8 and 9, 2008, and June 10, 2008, Respondent, as stipulated in the parties’ Joint Pre-hearing Stipulation, does not dispute that the amounts of costs set forth in the invoices submitted by Petitioners are fair and reasonable.8 The cost of the Transcripts of the Board of Pharmacy meetings on April 8 and 9, 2008, was $1,476.00. The cost of the Transcript of the Board of Pharmacy meeting on June 10, 2008, was $524.00. At the final hearing, the Board of Pharmacy’s objection appeared to be based on the timing of the payment of the court reporter’s fees related to the transcribing of those meetings. The Transcripts were filed with the Division of Administrative Hearings prior to the issuance of the Partial Final Order. Thus, the costs of the transcribing of the Board of Pharmacy meetings are properly included in the amount of costs to be awarded to Petitioners. The amounts of the costs claimed for the rule challenges in the individual and first consolidated invoice are reasonable. The costs incurred by Petitioners for the rule challenges as set forth in the individual and first consolidated invoices are listed below: Name Amount Vipul Patel $1,773.62 Miriam Hernandez $1,801.41 Mirley Aleman-Alejo $1,213.80 Valliammai Natarajan $321.17[9] John H. Neamatalla $1,118.72 Samad Mridha $975.12 Se Young Yoon $1,097.07 Saurin Modi $1,168.75 Deepakkumar Shah, M.Ph. $1,119.24 Mijeong Chang $1,213.16 Nabil Khalil $961.32 Hadya Alameddine $464.60 Balaji Lakshminarayanan $509.71 Anand Narayanan $461.87 The total amount of costs to be awarded for the challenge to the existing rule and to the policy statements is $14,199.56. The parties stipulated to the reasonableness of the costs contained in the second consolidated invoice. The second consolidated invoice lists the total costs as $2,096.12. Therefore, the costs for the second consolidated invoice are reduced to $209.61,10 which represents the amount attributable to litigation of entitlement of fees, ten percent of the total costs. The parties stipulated to the reasonableness of the costs contained in the third consolidated invoice. The third consolidated invoice lists the total costs as $580.62. Therefore, the costs for the third consolidated invoice are reduced to $58.06,11 which represents the amount attributable to litigating the entitlement of fees, ten percent of the total costs. Petitioners incurred costs in the litigation of the amount of attorney’s fees to be awarded. Petitioners retained an expert witness, Sandra Ambrose, Esquire. Ms. Ambrose’s fee relating to the issue of attorney’s fees is $5,200.00. Her fee is reasonable; however, Ms. Ambrose’s testimony was related to the amount of the fees not to the entitlement to fees and are, therefore, not awarded as part of the costs. The total costs to be awarded for the litigation of the fees is $267.67.
The Issue The issue in this case is whether Respondent is guilty of failing to pay Petitioner for the expenses of an examination and, if so, what penalty should be imposed.
Findings Of Fact Respondent is a licensed Florida domestic insurer operating under a current certificate of authority. Prior to the above-styled proceeding, Petitioner and Respondent were involved in another administrative proceeding. Petitioner seeks in the subject case to impose discipline for Respondent's refusal to reimburse Petitioner for audit expenses incurred during and after the prior administrative litigation. In DOAH Case No. 87-4518, Petitioner alleged, by Notice and Order to Show Cause filed September 11, 1987, that Respondent was in unsound financial condition, using methods of business that rendered its further transacting of insurance hazardous to policyholders and the public, in violation of a lawful order or rule of Petitioner, and in a financial condition that endangered the interests of policyholders, especially because its ratio of net premiums written to surplus exceeded 4:1. The Notice and Order to Show Cause alleges that the projected annualized ratio of net premiums written to surplus would exceed 4:1 by year- end; Respondent was not properly reserving for losses and expenses in connection with liability policies; the annual and quarterly statements reflect a continuing serious deficiency in loss reserves; financial deterioration seriously endangered the welfare of policyholders and the public; and major material discrepancies existed between Respondent's 1986 annual statement filed with Petitioner and Respondent's 1986 audited annual financial statements. The major material discrepancies between the financial statements consisted of allegations that the surplus was overstated by $41,327 in the annual statement filed with Petitioner; the loss adjustment expenses and loss reserves were carried at $1.4 million on the annual statement filed with Petitioner, but $2.7 million on the financial statement; and the unearned premiums were carried at $3.5 million on the annual statement filed with Petitioner, but $2.1 million on the financial statement. Three days prior to the filing of the Notice and Order to Show Cause, Petitioner commenced a financial examination of Respondent. The examination, which began on September 8, 1987, was a target examination. The other type of financial examination conducted by Petitioner is a triennial examination, which is performed not less frequently than every three years. Unlike the triennial examination, a target examination focuses on particular matters--in this case discrepancies between financial statements. Because Respondent commenced doing business on April 5, 1985, it had not yet been the subject of a triennial examination. The target examination is also different from an investigation, which focuses on the business practices of individuals rather than financial matters of insurers. Due to a perceived lack of reliability with respect to Respondent's accounting records, the scope of the examination was extended to include an analysis of all of Respondent's accounts. This broadening of scope took place during the first audit examination, which culminated with the Report on Examination for the period ending June 30, 1987. With respect to its examination of Respondent, Petitioner incurred, during the months indicated, the following audit expenses, all of which are reasonable: September, 1987 $7,889.00 October, 1987 10,682.00 November, 1987 10,678.00 December, 1987 8,931.65 January, 1988 10,401.00 February, 1988 2,051.80 March, 1988 645.40 July, 1988 237.70 August, 1988 5,795.80 September, 1988 5,564.40 October, 1988 2,645.40 January, 1989 610.80 TOTAL $66,132.95 10. On April 13, 1988, counsel for Petitioner and Respondent in DOAH Case No. 87-4518 met to discuss a settlement. Memorializing the meeting, Respondent's counsel acknowledged by letter dated April 13 that Petitioner's counsel indicated a desire "to go back into the company for the purpose of bringing forward the audit that was completed earlier this year." Respondent's counsel suggested a date for Petitioner's auditors to commence another audit and advised that he would postpone discovery in the hopes of settling many of the issues. Negotiations proved successful. On July 14, 1988, the final signatures were affixed to a Joint Settlement Stipulation for Agreed Order (Stipulation). The Stipulation recites in material part: [Petitioner] conducted an investigation of [Respondent], and alleged that it was in violation [of] certain provisions of the Florida Insurance Code. These violations included its ratio of net premiums written to surplus as to policyholders and its statutory insurer capital and surplus requirements. [Petitioner] conducted an examination of the company and on March 24, 1988, issued a Report on Examination of [Respondent] as of June 30, 1987. The Stipulation provides that the Insurance Commissioner may enter an order providing, among other things, that the Stipulation shall be incorporated by reference and that "[e]ach party to this case shall bear its costs, expenses and fees, including attorney's fees." The reference to "expenses" was added at the request of Respondent's counsel. The Consent Order, which was filed August 2, 1988, incorporates by reference the Stipulation and provides that "each party to this proceeding shall bear its own costs and attorney's fees." In November or early December, 1988, Respondent received an invoice for audit examination fees incurred from August through October, 1988. As was the case with prior invoices, the invoice recited a past-due amount. A letter dated December 15, 1988, from Respondent's president responds to the invoice by stating that the past-due amount is "apparently for fees and expenses incurred by [Petitioner] in performance of an audit examination done during the months of September, 1987 through April 1988. This obligation has been satisfied by [the] . . . Stipulation . . .." The December 15 letter does not object to the audit fees incurred during August through October, 1988. The December 15 letter notes that Petitioner, immediately after filing the Notice and Order to Show Cause in September, 1987, began a "complete audit . . . to support its allegations that [Respondent] was in financial circumstances justifying the . . . Order to Show Cause." The letter adds that, pursuant to the Stipulation, Respondent bore its accounting expenses in connection with the audit examination, just as Petitioner must bear its audit examination expenses. The audit examinations conducted prior to the settlement of DOAH Case No. 87-4518 served the purpose of discovery for Petitioner. Respondent never sought a protective order as to these fact-finding efforts. Although Petitioner conducted no investigation, the allegations in DOAH Case No. 87- 4518 involved Respondent's financial condition, not the business practices of individuals, so an investigation would have been inappropriate. The early audit examinations culminated in a Report on Examination for the period ending June 30, 1987. The Report on Examination was issued on March 24, 1988. Later audit examinations culminated in a Report of Examination for the period ending June 30, 1988. This Report of Examination, which was issued on February 26, 1988, states: This is the second report on examination of [Respondent] and represents a continuation and follow-up to the report filed as of June 30, 1987. The effect of the Stipulation and ensuing Consent Order is that Petitioner agreed to absorb all audit examination expenses incurred through the preparation of the Report on Examination for the period ending June 30, 1987. These audit examination expenses ended on or about March 24, 1988, when the first Report on Examination was issued. The March, 1988, audit expenses of $645.40 appear to be related to the issuance of the first Report on Examination because all of the activity occurs in the four days prior and two days after March 24. The audit examination expenses incurred through the preparation of the Report on Examination for the period ending June 30, 1987, total $51,278.85. The letter of December 15, 1988, from the president of Respondent disputes the past-due billing of $51,278.85 because "this obligation" was discharged by the Stipulation. This letter ignores the current billing for audit expenses incurred during August through October, 1988, because the writer knew that these fees were not intended to be covered by the Stipulation. The letter of April 13, 1988, from Respondent's counsel acknowledges the hiatus disclosed by the monthly statements. By April 13, 1988, there had been a break in audit examinations. The April 13 letter discusses an "updated audit" beginning perhaps May 9, 1988; covering the March 31, 1988, quarter; and hopefully taking less than the five months expended in the first audit resulting in the Report on Examination for the period ending June 30, 1987. In effect, the April 13 letter seeks a settlement in the near future, so that discovery need not be begun, while recognizing that another audit would not be completed for several months. The author of the April 13 letter claims that he intended to include in a settlement agreement, which he hoped would be finalized in the near-term, future audit expenses to be incurred over a period of months. If so, the burden was on the author to identify explicitly these future expenses in the Stipulation.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Insurance enter a final order suspending the certificate of authority of Respondent until the earlier of: a) six months or b) such time as Respondent complies with prior lawful orders of the Department of Insurance by remitting the sum of $14,854.10 and pays an administrative fine of $2500. ENTERED this 15 day of July, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15 day of July, 1992.
The Issue The issue in this case, as stipulated by the parties, is whether Respondent violated section 112.313(6), Florida Statutes (2006),1/ by drafting a legal opinion that justified a one-percent raise in salary for herself and others without the need for approval from the Hillsborough Board of County Commissioners.
Findings Of Fact At all times material to this action, Respondent served as the Hillsborough County attorney. Respondent was hired in August 2004, by Pat Bean, then-Hillsborough County administrator. Initially, Respondent reported to the county administrator, who served as Respondent's supervisor. However, shortly after Respondent was hired, a newly approved Hillsborough County Charter took effect and changed the organizational structure by taking the county attorney position out from under the supervision of the county administrator. Under the new county charter, Respondent's line of reporting was directly to the HBCC, which served as her supervisor. Respondent's employment agreement with Hillsborough County (Agreement) obligated her to perform the functions and duties attendant to the position of Hillsborough County attorney. The Agreement specified that Respondent "shall devote all of her professional or business time, attention and energies to Hillsborough legal work[.]" Respondent generally described the scope of her duties as overseeing the prosecution and defense of all actions related to Hillsborough County, rendering legal opinions and advising administrative departments on issues that were brought to the Office of the County Attorney (Office), and supervising the attorneys and staff within the Office. The administrative business of the Office was managed by a non-lawyer office administrator, Beth Novak. Respondent directly supervised Ms. Novak, who, in turn, supervised the administrative support staff and handled such administrative tasks as preparing draft budgets for Respondent's approval and addressing the Office's computer technology needs. The Office was divided functionally into separate legal sections covering different practice areas, such as land use, real estate, commercial transactions, labor and employment/human resources, and litigation. Each legal section had a managing attorney who supervised several attorneys within the section. Although Respondent generally supervised these sections, she described the sections as largely functioning independently, such that she often did not get involved in the matters they handled. Jennie Tarr was the managing attorney for the labor and employment/human resources legal section, which handled all non-litigation employment-related issues. For example, the director of employee benefits in the county's human resources department would bring issues related to employee benefits to Jennie Tarr; if a legal opinion were needed on an employee benefit issue, it would have been requested from Jennie Tarr. Respondent sometimes would receive requests for legal opinions herself. On occasion, she would issue the legal opinion herself. Otherwise, she would delegate the work to a subordinate lawyer by sending an email to someone in the appropriate legal section and asking them to respond directly to the requestor. In 2006, County Administrator Bean initiated a budget efficiency challenge to department directors, asking them to submit budget efficiency proposals for 2006 and 2007 that would reduce departmental costs without reducing services. This was not a completely new effort; department directors had been asked for years to find ways to cut costs in their budget proposals, without great success. Therefore, in 2006, discussions were held between Pat Bean, the deputy county administrator, Wally Hill, and the budget director, Eric Johnson, to identify options for rewarding department directors who submitted budget proposals that met the efficiency challenge. They wanted to provide a reward that would also serve as an incentive for department directors who came up short to do a better job cutting their budgets in the future. Hillsborough County had three different employee award programs. One was the extra mile award program. The recipient of an award under this program would be issued a certificate with no monetary value, to simply recognize the employee's efforts in going the "extra mile." All Hillsborough County employees were eligible for this non-financial award, if nominated. Typically, the deputy county administrator, who functioned as the county's chief operating officer, would identify extra mile awardees and coordinate with staff in the human resources department to have the certificates prepared. Ms. Bean, Mr. Hill, and Mr. Johnson decided to use this award program to recognize all department directors who submitted qualifying budget efficiency proposals. In addition, Ms. Bean, Mr. Hill, and Mr. Johnson discussed whether they also could use other award options that offered a financial reward and incentive. First, they considered whether they could make use of the productivity award program. Under this award program, employees who made suggestions that resulted in cost savings could be nominated for a one-time cash award, with the decisions on award issuance made by an executive committee. The amount of this cash award was measured by a percentage of the cost savings of the employee's suggestion, up to a cap. In October 2006, Mr. Hill sought approval to issue productivity awards to department directors who submitted qualifying budget efficiency proposals. However, his request was denied, because department directors were not eligible for productivity awards; that award program was only available to lower-level employees, and was not available to anyone at the department-director level or above. The only remaining option for providing a financial reward and incentive in connection with the efficiency budget proposals was the county's third award program, the special one-percent salary increase award. This award program was initiated at the suggestion of a former county administrator who recognized that reward systems were in place for the county's classified employees under the control of the Civil Service Board, but that some device was needed to reward unclassified county employees for superior or outstanding performance. Ms. Bean and Mr. Hill believed that the special one-percent salary award could be used to reward department directors who submitted qualifying budget efficiency proposals with three exceptions: the one-percent salary increase award could not be given to department directors who were already earning the maximum allowable salary level for their positions, because their salaries could not be increased; the one-percent salary increase also could not be given to former department directors who had left their county jobs after submitting qualifying budget proposals, because they were not earning a salary that could be increased; and the one-percent salary increase could not be given to the three department directors who were contract employees under contract with the HBCC, because it was believed that they were not eligible. These three contract department directors were Ms. Bean, Respondent, and Rick Garrity, who was the director of the county's Environmental Protection Commission. They decided, in addition to the extra mile awards, to go ahead with the one-percent salary increase award for all department directors who submitted qualifying budget efficiency proposals and who could receive the salary increase. For those directors falling in one of the three exception categories, they would just receive extra mile awards. Extra mile award certificates were prepared for all department directors submitting qualifying budget efficiency proposals and were presented at a January 25, 2007, Board meeting. The extra mile award recipients were also announced and honored at a staff budget-kickoff meeting held on February 1, 2007. At the February 1 budget kickoff, the honored department directors were given one of two different memos acknowledging their award(s). For those department directors just receiving an extra mile award certificate, such as Respondent, their memo acknowledged their budget efficiency proposal for which they were being given an extra mile award certificate. For those department directors who were also considered eligible for a one-percent salary increase award, their memo acknowledged their budget efficiency proposal for which they were being given an extra mile award certificate, and also, for which they would be receiving a one-percent salary increase. As stated in the memo, the one-percent salary increase was awarded retroactive to January 7, 2007. Respondent did not attend the budget kickoff. However, she had received her extra mile award certificate, dated January 25, 2007, and she also received a February 1, 2007, memo, acknowledging her extra mile award (but not a one-percent salary increase award), based on her department's qualifying budget efficiency proposal. After the meeting, the Office administrator, Ms. Novak, sent a curious email to Respondent, stating: At the budget kickoff meeting this morning, Wally handed out "Extra Mile Award" memos to some of the Department Directors, Rick Garrity, and you for your work during the last budget cycle on efficiency measures. Wally announced that each of you would be given a $1,000 award! Congratulations! No explanation was given for this message; Ms. Novak testified that she did not recall these events or the email. The information in the email was, at best, garbled, starting with the inexplicable reference to a $1,000 cash award. In addition, Ms. Novak apparently had not been aware that there were two different versions of memos. The memo with a subject line called "Extra Mile Award," described in the email, was the version given to Respondent and others falling in one of the three exception categories, and the contents of that memo make clear that the recipient is only receiving an extra mile award certificate. The subject line of the other memo version was "Recognition of efficiency." This version of the memo was given to department directors who also received the special one-percent salary increase award, as the contents of that different memo makes clear. Mr. Hill did not recall making any announcement of the financial awards. If any such announcement was made, it would stand to reason that the announcement would have tracked the contents of the two different February 1, 2007, memos--that those department directors receiving an "extra mile award" memo were recipients of the extra mile award only, and that those department directors receiving a "recognition of efficiency" memo were recipients of both the extra mile award and a one-percent salary increase award. Respondent testified that she spoke with Ms. Novak about Ms. Novak's email "later that afternoon" when Respondent questioned Ms. Novak about whether Respondent could really receive a financial award. Respondent elaborated as follows: I was concerned about this being the Productivity Award. And she said that it wasn't the Productivity Award. And I was really very skeptical about receiving an award. And she said, "oh yeah, you have that provision in your contract." You know, "let me get it for you." And she brought my contract into my office. And you know, it was turned to the benefit section of it. And that's the section that she referred to. Approximately 90 minutes after Ms. Novak's email to Respondent, Respondent sent an email to Ms. Bean and Mr. Hill, in which she stated as follows: After attending the Budget kick off meeting this morning Beth [Novak] reminded me that a provision in my contract allows me to receive the award . . . see page 10, Section E. which states: Hillsborough agrees to make available to the Attorney such other benefits that are not specifically covered by this agreement as they now exist, and may be amended from time to time, for other employees of Hillsborough. . . . Thank you for the award. Renee Francis Lee, County Attorney Contrary to Respondent's testimony, one of the few things that Ms. Novak recalled clearly about the events in this time period was that it was Respondent who asked Ms. Novak to get Respondent's contract and that Ms. Novak was not asked her opinion on that contract, nor did she recall offering her opinion. Ms. Novak's version of the events is accepted as more credible than Respondent's version. It is not credible that Ms. Novak, a non-lawyer, would spontaneously offer advice to Respondent regarding the interpretation of Respondent's Agreement, much less that a "very skeptical" Respondent would be immediately convinced by this non-lawyer's legal opinion. Instead, the implication of the credible testimony is that Respondent wanted to attribute the suggestion and rationale that she could accept a financial award to someone other than herself. Despite the fact that Respondent's email to Ms. Bean and Mr. Hill did not explicitly refer to the salary increase award, it was interpreted by Ms. Bean and Mr. Hill to mean that Respondent believed she was eligible for the one-percent salary increase award. Up to that point, Mr. Hill and Ms. Bean believed that Respondent was not eligible because of her Agreement with the HBCC. Likewise, they believed that neither Ms. Bean nor Dr. Garrity, the other two department directors under contract with the HBCC, were eligible. Based on Respondent's email suggesting otherwise, Ms. Bean had the matter referred to the human resources department to resolve. According to Respondent, the next day (February 2, 2007), she received a telephone call from Christina Swanson asking her for an opinion on the eligibility of Respondent, Ms. Bean, and Dr. Garrity for the one-percent salary award. Ms. Swanson was the division director of employee benefits in the human resources department. She was acting in place of the department director in following up on this matter.2/ Ms. Swanson had been contacted by Debbie Dahma, an employee in the executive compensation division of the human resources department. Ms. Dahma told Ms. Swanson that Respondent had requested a one-percent salary increase award and asked Ms. Swanson to find out if Respondent was eligible. Because Respondent was the one who requested the award, Ms. Swanson thought it was appropriate to call Respondent directly. Ms. Swanson told Respondent that she understood that Respondent had requested to be eligible for the one-percent salary increase and asked her for a written legal opinion. Ms. Swanson explained that she asked for a legal opinion, in writing, "knowing the sensitivity of the issue[.]" She also explained that she did not ask Jenny Tarr for this legal opinion because she usually brought "benefit" issues to Ms. Tarr, whereas this was a salary issue involving a specific employee's contract. Ms. Swanson said that she asked Respondent to give her a written legal opinion addressing whether Respondent, Ms. Bean, and Dr. Garrity--the three department directors under contract with the HBCC--were eligible for the one-percent salary increase award. Ms. Swanson did not give Respondent any deadline by which, or time frame within which, she wanted or needed the legal opinion. Respondent testified that she was busy on something else that day, February 2, 2007, and as a result, this matter sat on her desk all day. At the end of the day, she decided to just handle it herself rather than to delegate it to Jenny Tarr or some other lawyer, because "the contract was right there." In addition, Respondent testified that "I think, you know, for some reason I feel like I remember that they were in a rush for something or somebody was going on vacation. Something was happening that they needed it or wanted it right away. I had not gotten to it all day, so I stayed actually and wrote the opinion myself." Respondent's feeling that she may have been asked to expedite the legal opinion is rejected as not credible and contradicted by Ms. Swanson's clear recollection that no time frame was given.3/ After admittedly not working on this matter all day, Respondent issued her legal opinion by email sent to Ms. Swanson, at 5:29 p.m., on February 2, 2007. The legal opinion, in its entirety provided: Christina, You have requested that I review the contracts of three employees (Garrity, Bean and Lee) to determine if they are eligible to receive the 1% salary award granted to the management staff who found efficiencies in their budget which contributed to approximately $17 million savings in the 2006-2007 budget. I do not have access to Garrity's contract, but will be happy to review it when you forward it to me. As it relates to the Bean contract, language supporting the award can be found in Section 15, entitled Other Terms and Conditions of Employment, subsection B. reads [sic] as follows: All provisions of the Hillsborough County Charter and Code, and regulations and rules of the County relating to vacation and sick leave, retirement and pension system contributions, holidays, and other benefits and working conditions as they now exist or hereafter may be amended, also shall apply to Employee as they would to other managerial employees of the County, in addition to said benefits enumerated specifically for the benefit of the Employee except as herein provided. As it relates to the Lee contract, language supporting the award can be found in Section XVI, entitled General Provisions, subsection E. which reads as follows: Hillsborough agrees to make available to the Attorney such other benefits that are not specifically covered by this agreement as they now exist, and may be amended from time to time, for other employees of Hillsborough. Please let me know if you have any other questions. Renee Francis Lee, County Attorney [address, phone, email address] Although Respondent's legal opinion acknowledged that her task was to review the contracts, the legal opinion did not identify other provisions of the contracts that could bear on the framed question of eligibility "to receive the one-percent salary award." For example, in reviewing Respondent's Agreement, well before one finds the "General Provisions" section quoted, in part, in Respondent's opinion, one would find Section III entitled, "Compensation." This section provided in pertinent part: Hillsborough agrees to pay the Attorney for services rendered pursuant hereto an annual base salary of One Hundred Seventy Thousand Dollars ($170,000), payable in installments at the same time that other employees of Hillsborough are paid. Hillsborough shall consider additional salary or benefit increases as it may deem appropriate no later than 60 days after completion of the Attorney's annual performance evaluation[.] Respondent's legal opinion does not discuss the Compensation section or why she concluded, if she did, that this section's procedure for considering "additional salary or benefit increases" was deemed not applicable to a "1% salary award." Similarly, Respondent's legal opinion does not discuss or assess the applicability of the "Salary" section in Ms. Bean's contract, which is similar to the "Compensation" section in Respondent's Agreement. In her legal opinion, Respondent represents that she has quoted Section XVI, subsection E, of her Agreement in its entirety by stating that the provision "reads as follows[.]" Contrary to that representation, Respondent only selectively quoted from the cited subsection, omitting the following sentence that comes after the sentence quoted in the legal opinion: These benefits will include, but not be limited to cafeteria plan options and contributions to the Florida Retirement System, holidays, and any other benefits for specified sick leave accrual as are provided for Hillsborough employees. The omitted language would have reasonably suggested analysis, or at least consideration of, the legal principles of contract interpretation set forth in Florida cases by which the meaning of a general term (such as "but not be limited to") is determined by reference to the specific terms with which it is grouped.4/ Application of this sort of analysis could reasonably lead one to conclude that this subsection has application to employee benefits provided across-the-board to all county employees by virtue of their status as county employees, because that appears to be the nature of the specific benefits mentioned. Respondent's legal opinion, by selectively quoting from the subsection of her Agreement that she chose to address, omitted the legal analysis that would follow from the omitted contract language. Respondent's legal opinion separately sets forth certain language from Ms. Bean's contract and from Respondent's Agreement, without any discussion or analysis of the significance of differences in the quoted language. For example, the provision relied on to support a one-percent salary award to Ms. Bean refers to benefits "as they would [apply] to other managerial employees of the County." In contrast, the quoted language from Respondent's Agreement refers to benefits "for other employees of Hillsborough County." Respondent's legal opinion does not discuss the significance of this difference, despite the fact that the issue as framed in the legal opinion is the eligibility for a one-percent salary award granted to "management staff" in connection with their budget efficiency proposals. Any analysis of the different contract terms could have led Respondent to conclude that this award was only available to managerial employees, and not to all employees of the county. In this regard, Respondent's framing of the issue is itself inconsistent with the facts, which were that this one-percent salary increase award was only available to certain managerial employees, i.e., those who served as department directors. For example, Ms. Novak, the Office administrator, was a managerial employee, but she was not the department director. So too, the managing attorneys of each of the Office's legal sections were managerial employees, but not department directors. Therefore, had Respondent assessed the significance of the "managerial employees" language in Ms. Bean's contract, she might have concluded that this award was not available to all other managerial employees of the county.5/ Respondent's legal opinion, on its face, appears to acknowledge the nature of the award at issue, i.e., that it is the special one-percent salary increase award. However, Respondent testified that she misunderstood the nature of the award she was being asked to opine on and that her confusion was caused, in part, by Ms. Swanson reading to her a description of a one-time cash award program that was not a salary increase. Respondent's testimony was not credible and was inconsistent with other testimony of both Ms. Swanson and Respondent, herself. Respondent testified that she believed the award was a $1,000 one-time cash award. While this testimony would be consistent with Ms. Novak's misstatement in her email, Respondent also testified that she was concerned that the award was a productivity award and that she pointedly asked Ms. Novak and was reassured that it was not a productivity award. There were only two types of financial awards--if the award was not a productivity award, then it had to be a special one-percent salary increase award. Respondent's testimony that she did not understand that she was addressing a one-percent salary increase award is belied by her use of the phrase "1% salary award" in the legal opinion and by her own expressed certainty that this was not a productivity award (which would have been the only type of award providing a one-time cash payment). Respondent also attempted to blame Ms. Swanson for the confusion and uncertainty about the nature of the award on which she opined. Respondent testified that Ms. Swanson did not appear to know very much about the award at issue. Inconsistently, Respondent also testified that Ms. Swanson actually read to her a description of the award from the consultant's study that created the award program, which is how Respondent was led to believe it was a one-time cash payment, with caps. Ms. Swanson denied reading from the consultant's study, testifying credibly that she did not have that study at the time. If Respondent was actually confused or unclear about the facts, it was incumbent on her, in the proper performance of her professional duties, to make inquiry so as to be clear about the facts on which she offered a legal opinion. That is a very basic obligation of any lawyer asked to give a legal opinion to a client.6/ Yet Respondent admitted that she made no such inquiries. Had Respondent asked Ms. Swanson to direct her to the person with information about the award, Respondent would have been directed to Ms. Bean, Mr. Hill, and/or Mr. Johnson, who could have explained their failure to gain approval to use the productivity award program and that the financial award at issue was a special one-percent salary increase award that would result in a one-percent salary raise to the recipients. Had Respondent inquired, she could have been given the "recognition of efficiency" February 1, 2007, memo provided to other department directors, which specifically described the award. Respondent attempted to justify her failure to make these inquiries by testifying to her belief that issuance of her opinion was urgently needed--testimony previously found not credible. However, if Respondent truly was confused about the facts on which she was opining on February 2, 2007, or lacked sufficient time to properly analyze the contract language in accordance with Florida law on contract interpretation, it was incumbent on Respondent to express these limitations on her ability to render a legal opinion based on a complete understanding of the facts and application of the law to those facts. Moreover, Respondent's claim of urgency would not explain why Respondent did not conduct any factual inquiry or legal analysis before issuing a second legal opinion six days later, which extended her legal opinion to include Dr. Garrity after she obtained his contract. The point is not whether Respondent's legal opinion was right or wrong; the point is that Respondent's legal opinions failed to set forth a complete recitation of the facts or a discussion of the legal conclusions that follow from a complete recitation of the facts. Respondent claims confusion about the facts, but no such confusion was expressed in her legal opinion. Respondent claims she was rushed, but that claim was not credible and, significantly, no such limitation was expressed in her legal opinion. If it was not possible for Respondent to obtain a clear understanding of the complete facts and to discuss the legal conclusions that flow from the complete facts, it was incumbent on Respondent to specify the limitations of her opinion. The proper performance of Respondent's professional duties as Hillsborough County attorney required nothing less. Instead of properly performing her professional duties by providing her client with the requisite independent professional judgment based on a complete recitation of facts and analysis of the law applicable to those facts, Respondent's legal opinion on February 2, 2007, was a self-interested advocacy piece. Other than adding language from Ms. Bean's contract, the February 2, 2007, product was nothing more than a repackaging of Respondent's February 1, 2007, email to Ms. Bean and Mr. Hill that purported to describe a non-lawyer's opinion of Respondent's Agreement. Respondent had a second chance to improve her product when she issued a second legal opinion the next week addressing Dr. Garrity's eligibility for the one-percent salary award. Despite the additional time and the fact that Respondent did not claim any rush in issuing this second legal opinion, Respondent took no steps to address the deficiencies from the February 2, 2007, letter that Respondent sought to justify because of perceived time pressure. Respondent attempted to suggest that the facts underlying her legal opinions were incomplete or confused because there was great confusion at the time with regard to the various award programs. That suggestion was not borne out by the credible evidence. Ms. Swanson admitted to not fully understanding the financial award programs at the time, because she was pinch-hitting for the department director. However, it was clear from the credible evidence that the persons involved in making the decision to give financial awards understood the differences between the three award programs, understood that they could not use the productivity award program, and understood that the financial award they were giving was a special one-percent salary increase award. Respondent also seemed to suggest that her legal opinions must have been proper and sufficient, because no one asked her questions about them. In particular, Respondent points to the fact that Ms. Swanson went to law school and passed a bar examination, albeit that Ms. Swanson was admitted to the Ohio State Bar in 1976 and did not practice law. Ms. Swanson testified, credibly, that she did not question Respondent's legal opinions because she did not believe that was her place. Instead, she explained that she was just looking to provide a written legal opinion on the question of eligibility as back-up to provide to the employee relations division of the human resources department, which processed the paperwork that put through the one-percent salary increases. Respondent testified that she was not aware that she had been given a one-percent salary increase after she issued her legal opinion. Respondent claimed to believe that she had, instead, received a $1,000 one-time cash award. Two years later, an audit revealed that she and Ms. Bean had received the one-percent salary increase continuously since 2007. Dr. Garrity did not accept his one-percent salary increase award. Respondent testified that she ultimately returned the proceeds from the one-percent salary increase. When asked why she returned the money two years later, she testified as follows: Well, you know, there was such a brouhaha at the board meeting that day. And I had never intended to have a one-percent increase. I thought it was an award. I thought it was a one-time award. So, I returned it because, if they didn't want me to have it, I should give it back. If it was not what I intended to opine on, then I didn't want to keep it. So, you know, those were the reasons I gave it back. Implicit in Respondent's explanation is that if she had realized that the one-percent salary "award" was a one-percent salary "increase," she would not have been able to opine that she was eligible to receive it without approval by the HBCC, because her Agreement required HBCC approval of salary increases. Yet, assuming Respondent was really confused about this, any appropriate inquiry by Respondent would have confirmed that the only award she could have been opining on was a one-percent salary increase. Whether her zeal to advocate for a financial reward for herself and others caused her to purposely mischaracterize her legal opinion after the fact or whether her zeal simply caused her, at the time, to ignore the process mandated by an attorney properly carrying out her duties to a client in rendering a legal opinion, the result is the same. The undersigned finds as a matter of ultimate fact that Respondent acted with wrongful intent by placing her own self-interest in securing the special financial benefit she coveted above her professional obligations to her client, the HBCC. Respondent did not properly perform her professional duties when she issued first one, and then another, legal opinion to justify a one-percent salary increase for herself and others without the approval of the HBCC.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Ethics issue a final order and public report: (1) finding that Respondent, Renee Lee, violated section 112.313(6), Florida Statutes (2006); and (2) recommending as penalties to the proper authority that Respondent be publicly censured and reprimanded, and that a civil fine of $5,000 be imposed. DONE AND ENTERED this 11th day of July, 2012, in Tallahassee, Leon County, Florida. S ELIZABETH W. MCARTHUR Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of July, 2012.
The Issue The issue in this case is whether Respondent applied the following policy to Petitioner and, if so, whether the policy constitutes an unpromulgated "rule" as defined in Section 120.52(15), Florida Statutes. If during its review of a rate change filing, DOI determines an insurer is not in compliance with the annual rate filing requirements of section 627.410(7), Florida Statutes, and if the filing involves a Medicare Supplement form, section 627.6745, Florida Statutes, then DOI will only approve an "annual portion" as a percentage of the rate change requested based on the elapsed time period since the last approved rate filing.
Findings Of Fact The Parties. Petitioner, Central States Health and Life Company of Omaha (hereinafter referred to as "Central States"), is a corporation domiciled in Nebraska. Central States holds a certificate of authority issued by the Department which allows it to sell life and health insurance, including individual and group standardized Medicare supplement policies, in Florida. Respondent, the Department of Insurance and Treasurer (hereinafter referred to as the "Department"), is an agency of the State of Florida. The Department is charged with the responsibility for, among other things, the review and approval of health insurance policy forms used in Florida. General Requirements for Medicare Supplement Policy Forms in Florida. No "basic insurance policy" may be delivered in Florida unless the "form" has first been approved by the Department. Section 627.410(1), Florida Statutes. Section 627.410(6), Florida Statutes, additionally requires that a copy of the applicable rating manual or rating schedule included as part of a insurance policy form must be filed with the Department for approval before any "health insurance policy form" is delivered in Florida. Pursuant to Section 627.410(7), Florida Statutes, insurers required to file rating manuals or rating schedules pursuant to Section 627.410(6), Florida Statutes, must make an "annual filing" with the department. The rating manual and rating schedule requirements of Section 627.410(7), Florida Statutes, may be satisfied by: A "rate filing prepared by an actuary which contains documentation demonstrating the reasonableness of benefits in relation to premiums charged in accordance with the applicable rating laws and rules promulgated by the department." Section 627.410(7)(b)1, Florida Statutes; or "If no rate change is proposed, a filing which consists of a certification by an actuary that benefits are reasonable in relation to premiums currently charged in accordance with applicable laws and rules promulgated by the department." Section 627.410(7)(b)2, Florida Statutes. The filing requirements of Section 627.410(6) and (7), Florida Statutes, apply to Medicare supplement forms. Section 627.6745, Florida Statutes, limits the manner in which entities providing Medicare supplement policies may meet the annual filing requirement of Section 627.410(7), Florida Statutes. Section 627.6745, Florida Statutes, eliminates the use of the certification procedure described in Finding of Fact 7.b., supra, by Medicare supplement policy providers. Section 627.6745(2), Florida Statutes, requires that all providers of Medicare supplement policy forms: . . . file annually its rates, rating schedules, and supporting documentation demonstrating that it is in compliance with the applicable loss ratio standards of this code. The filing of rates and rating schedules shall demonstrate that the actual and expected losses in relations to premiums comply with the requirements of this section. Rule 4-156.012(3), Florida Administrative Code, requires that issuers of Medicare supplement policies and certificates must file their rates annually "for approval by the Department in accordance with Section 627.410, Florida Statutes." Section 627.6745, Florida Statutes, also provides limitations on the rates which may be charged for Medicare supplement policies: Medicare supplement policies shall return the following to policyholders in the form of aggregate benefits under the policy, with respect to the lifetime of the policy, on the basis of earned premiums and on the basis of incurred claims experience . . . and in accordance with accepted actuarial principles and practices: At least 75 percent of the aggregate amount of premiums earned in the case of group policies. . . . for individual policies issued on or after July 1, 1989, at least 65 percent of the aggregate amount of premiums earned. . . . Stated very simply, this provision requires that for every dollar of premiums earned, a minimum of 75 cents must be paid in claims for group policies and a minimum of 65 cents must be paid in claims for individual policies. The grounds for disapproval of "any form filed under s. 627.410" are provided in Section 627.411, Florida Statutes. In pertinent part, Section 627.411(1), Florida Statutes, provides that a "form" may be disapproved if the form: (e) Is for health insurance, and provides benefits which are unreasonable in relation to the premium charged, contains provisions which are unfair or inequitable or contrary to the public policy of this state or which encourage misrepresentation or which apply rating practices which result in premium escalations that are not viable for the policyholder market or result in unfair discrimination in sales practices. The Department has adopted rules establishing rate filing procedures. Rule 4-149.003, Florida Administrative Code. Rule 4-149.006, Florida Administrative Code, sets out the information an actuary must provide and the manner in which an actuary is to provide that information. The Department has also adopted rules providing the manner in which the reasonableness of benefits in relation to premiums will be determined. Rule 4-149.005, Florida Administrative Code. Central States' 1998 Rate Increase Filings and the Department's Denial Thereof. On or about January 20, 1998, Central States filed two requests for rate increase with the Department. One request sought a 39% increase for Individual Medicare supplement policy forms (hereinafter referred to as "Individual Medicare Forms") sold in Florida and the other sought a 39% increase for Group Medicare supplement policy forms (hereinafter referred to as "Group Medicare Forms") sold in Florida. For purposes of this Final Order all Findings of Fact and Conclusions of Law apply equally to each type of rate increase request unless otherwise noted. Both rate increase requests were accompanied by an actuarial memorandum certified by Dawn Helwig, an actuary retained by Central States. The rate increase requests were reviewed by Linda Ziegler, an actuary employed by the Department. Following her review, Ms. Ziegler asked for additional information or explanation concerning several issues by letters dated February 10, 1998. By letter dated February 18, 1998, Central States responded to Ms. Ziegler's letters. Each of the issues raised by Ms. Ziegler was addressed in the February 18, 1998, letter. After review of Central States' rate increase requests, the Department informed Central States that the 39% rate increases it had requested were disapproved. Central States was informed of the denial by letter dated March 6, 1998. The Department also informed Central States in the March 6, 1998, denial letter that rate increases of 9.6% were "APPROVED." Central States was requested to "provide revised rate pages reflecting the approved rate increase by March 20, 1998." The Department denied the 39% rate increase requests for three reasons: The Department determined that the rate increases sought by Central States did not provide benefits which were reasonable in relation to the premium to be charged. Therefore, the Department denied the rate increase requests pursuant to Section 627.411(1)(e), Florida Statutes. This determination was based upon a finding that Central States' projected Anticipated Loss Ratio did not meet or exceed the weighted average of the Anticipated Loss Ratio *N (hereinafter referred to as the "*N Test"). "Anticipated Loss Ratio" is defined in Rule 4- 149.006(3)(b)20, Florida Administrative Code, as essentially the present value of future benefits (claims) divided by the present value of future premiums. The conclusion that Central States' projected Anticipated Loss Ratio did not meet or exceed the *N Test was based essentially upon four areas of disagreement with Ms. Helwig's calculations in her actuarial memoranda; The Department determined that Central States' "forms" were in violation of Chapter 627, Florida Statutes. Therefore, the Department denied the rate increase requests pursuant to Section 627.411(1)(a), Florida Statutes. This determination was based upon the Department's conclusion that Central States had failed to make annual rate filings as required by Section 627.410(7), Florida Statutes, and Rule 4-156.011, Florida Administrative Code; and The Department determined that Central States' requested rates were not "viable." Therefore, the Department denied the rate increase requests pursuant to Section 627.411(1)(e), Florida Statutes. This determination was based upon the Department's conclusion that because Central States had failed to obtain annual approval of its Individual and Group Medicare Forms for several years the amount of the increases sought by Central States was not "viable." The four areas of disagreement with Ms. Helwig's calculations are: What Individual Medicare Forms should be considered to have been issued to individual customers after "6/1/94" for purposes of Rule 4-149.005(2), Florida Administrative Code. (This issue only impacted Central States' Individual Medicare Forms request); Whether Central States should pool its experience with its Individual and Group Medicare Forms; Whether Central States should use its actual nationwide experience instead of its actual nationwide experience "adjusted to the Florida Rate basis"; and Whether it was appropriate for Central States to assume that its premiums would be received and its claims incurred at the beginning of the year. The Department concluded that 32.7% increases would meet the *N Test if the four areas of disagreement with Ms. Helwig were corrected by Central States. The four areas of disagreement are the subject of Case Numbers 98-1562 and 98-1563. The Department also concluded, however, that even if Central States met the *N Test it would only be entitled to a one-year adjustment which it calculated to be 9.6%. It is this determination that Central States has alleged constitutes the application of an unpromulgated rule. The Challenged Unpromulgated "Rule." The specific statement or statement description challenged by Central States as an unpromulgated rule is as follows: If during its review of a rate change filing, DOI determines an insurer is not in compliance with the annual rate filing requirements of section 627.410(7), Florida Statutes, and if the filing involves a Medicare Supplement form, section 627.6745, Florida Statutes, then DOI will only approve an "annual portion" as a percentage of the rate change requested based on the elapsed time period since the last approved rate filing. (The foregoing statement of policy will be referred to as the Challenged Policy"). Central States has alleged that the Department applied the Challenged Policy to it in denying its rate increase requests. Central States has also alleged that the Challenged Policy had not been adopted or proposed as a rule pursuant to Section 120.54, Florida Statutes, at the time of its application by the Department. The Department's Application of the Challenged Policy. The Challenged Policy is actually more than one policy. First, the Challenged Policy includes a policy of the Department that it will not allow a rate increase for Individual or Group Medicare supplement forms attributable to more than a one-year period if an insurer fails to comply with the annual filing requirement of Section 627.410(7)(b), Florida Statutes. This policy is based upon the Department's conclusion that the failure to obtain annual approval means that any future "form" filed by an insurer is in violation of Chapter 627, Florida Statutes, and its conclusion that any future rate increase will not be viable. Secondly, the Challenged Policy includes a policy of the Department that, if the annual filing requirement has not been met, it will only approve an "annual portion" as a percentage of the rate change requested based on the elapsed time period since the last approved rate filing. The evidence in this case proved that the first part of the Challenged Policy formed a large part of the basis for the Department's denial of Central States' applications for rate increases. The evidence also proved that the second part of the Challenged Policy was relied upon by the Department in determining that increases of 9.6% would be acceptable. The Challenged Policy was a statement of general applicability implementing and interpreting Section 627.411(1)(e), Florida Statutes, and prescribing policy of the Department concerning the procedures the Department intended to follow in determining a viable rate of increase for Medicare supplement forms where an insurer has not made the annual filings required by Section 627.410(7), Florida Statutes. The Department has not disputed this finding. The Challenged Policy, as alleged by Central States, constitutes a "rule" as that term is defined in Section 120.52(15), Florida Statutes. The Challenged Policy had not been adopted by the rulemaking procedure provided in Section 120.54, Florida Statutes, at the time of its application to Central States. Throughout this proceeding, the Department has conceded that the Challenged Policy is a "rule" and that the Challenged Policy has not been adopted by rulemaking. Feasibility of Rulemaking. The Challenged Policy was proposed for adoption as a rule by the Department prior to the filing of the petition in this case. On November 7, 1997, the Department caused notice of its intent to adopt proposed rules to be published. Volume 23, Number 45, Pages 6045-6068 of the Florida Administrative Weekly (November 7, 1997). Pursuant to this notice the Department indicated its intent to repeal Chapter 4-149, Florida Administrative Code, and replace it with a new Chapter 4-149. Included in the newly proposed rule chapter, the Department included newly proposed rule 4-149.108(14): (14) If an insurer has not made an annual rate filing or certification stating the reasonableness of benefits in relation to the premiums charged as required by section 627.410(7), Florida Statutes, other than when the department approved a lower increase than what was requested, the current rate increase request shall be limited to the current year's increase. The current year's increase is defined as the maximum level average annual increase permitted by this part, determined assuming that the insurer had implemented level annual rate increase for the period where no filing or certification had been made. (Hereinafter referred to as the "First Proposed Policy"). Volume 23, Number 45, Pages 6045-6068 of the Florida Administrative Weekly (November 7, 1997)(hereinafter referred to as the "Proposed Rules"). Neither party disputes the fact that the Challenged Policy is included in the First Proposed Policy. Nor do the parties dispute that the Department applied the policies of the First Proposed Policy to Central States in March 1998 in denying its requested rate increases and approving a 9.6% rate increase. Therefore, the evidence failed to prove that rulemaking was not feasible and practicable under Section 120.54(1)(a), Florida Statutes.
