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 issues are whether any Petitioner has proved by clear and convincing evidence that he timely submitted a request to purchase "Additional Accrual Service" (AAS) credit to the Board of Trustees (Board) of the City of Hallandale Beach Police Officers' and Firefighters' Pension Plan (Plan) in writing or at a public meeting and whether the Board prohibited such Petitioner from purchasing the requested AAS credit.
Findings Of Fact At all material times, Respondent has maintained city police and fire departments.3 Respondent sponsors the Plan to provide defined benefits, mostly on retirement, to members of the Plan, who are current and former city police officers and firefighters. Respondent primarily documents the Plan in ordinances that it enacts from time to time--as relevant in this case, in 2008 and 2011.4 Changes to the Plan may result from negotiations between Respondent and the police and firefighters unions, and the collective bargaining agreement may document the new provision until it is enacted by ordinance. The relevant agreement is the Collective Bargaining Agreement between Respondent and the Hallandale Beach Professional Fire Fighters Metro Broward Local 3080 District 10 for October 1, 2005 through September 30, 2008, as executed on October 3, 2006 (CBA).5 The Plan and the funds associated with the Plan are "under the exclusive administration and management" of the Board.6 The "responsibility for the proper effective operation of the … Plan and for making[7] the provisions of this Ordinance is vested in [the] Board."8 The 3 Subsequent to the timeframe at issue, the city fire department merged with the Broward County fire department. 4 For most of the time in question, the relevant Plan was documented in City of Hallandale Beach Ord. Nos. 2008-29 and 2011-11. Provisions material to this case were unchanged in the 2011 ordinance. References to the "Plan" are to the 2011 ordinance due to its superior formatting and ease of use. All references to "section" or "§," such as "section 8.08," are to the Plan, as codified by the ordinance, unless the reference is to Florida Statutes. 5 Presumably, Respondent negotiated identical language in the collective bargaining agreement with the police union, but this contract is not part of the record. 6 § 2.01. 7 "Making" probably means "implementing," because Respondent, not the Board, "makes" or enacts ordinances. 8 § 3.01. Board consists of one trustee elected by the police, one trustee elected by the firefighters, two trustees appointed by Respondent, and a fifth trustee, who is selected by the other four trustees and appointed by Respondent.9 The Plan authorizes the Board "to take such action as may be necessary to carry out the provisions of the Plan and all decisions of the Board … , made in good faith, … shall be final, binding and conclusive on all parties."10 The Board may "establish and maintain communication with [Respondent's] departments and other agencies of government as is necessary for the management of the … Plan," but the Board must "determine all questions relating to and process all applications for … benefits."11 However, "[i]f an action of the Board has an impact on [Respondent's] contribution the action must be approved by the City Commission. [Respondent] retains the right to obtain independent actuarial services to determine financial impact." Despite this exception to the Board's administrative authority, only the Board, not Respondent, is a fiduciary of the Plan, so as to be subject to the obligation "to discharge its responsibilities solely in the interest of the members and beneficiaries of the Plan for the exclusive purpose of providing benefits to the members and their beneficiaries and to defray the reasonable expenses of the Plan."12 As authorized by the Plan,13 the Board retained, at all material times, the services of independent counsel, actuarial firms, and pension services 9 § 3.02. See also §§ 175.061(1)(b)2.; 185.05(1)(b)2., Fla. Stat. Chapter 175 applies to a city pension plan for firefighters, and chapter 185 applies to a city pension plan for police officers. 10 § 3.09. 11 § 3.11(f) and (g). 12 § 3.10. This section continues: "The [Board] shall exercise those fiduciary responsibilities with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a similar character and with similar aims." 13 § 3.12. companies to assist in the administration of the Plan. Board counsel and a representative of the pension services company routinely attended Board meetings. The Plan's primary retirement benefit, which is payable for the remaining life of the member, but not less than ten years,14 is based on a formula that, for a vested member,15 multiplies the member's final average compensation by the member's credited years of service by the applicable annual accrual rate, which is typically 3.2%.16 For instance, the lifetime benefit payable to a member earning annual compensation of $50,000 with 20 years of service at an accrual rate of 3.2% would be $32,000 annually or $2667 monthly.17 The Plan's funding is more complicated and requires the services of an actuary to calculate the assets and liabilities of the Plan, which are held by a trust.18 For a fully funded plan providing a defined benefit, the assets--the 14 § 6.04. 15 The vesting period for the Plan is generally ten years. §§ 1.31, 1.32, and 8.01. 16 § 6.02. 17 The annual benefit is the product of $50,000 x 20 x .032. 18 For an excellent discussion of the responsibilities of an actuary in determining the proper funding of a pension plan, see Vinson & Elkins v. Comm'r of Int. Rev., 99 T.C. 9, 15-16 (1992), which cites the following legislative history concerning the treatment of actuaries in The Employee Retirement Income Security Act of 1974: In estimating pension costs, actuaries must make assumptions (“actuarial assumptions”) about a number of future events, such as the rate of return on investments (“interest”), employees' future earnings, and employee mortality and turnover. Actuaries also must choose from a number of methods to calculate future plan liabilities. The amounts required to fund any given pension plan can vary significantly according to the mix of these actuarial assumptions and methods. As a result, the assumptions and methods used by actuaries are basic to the application of minimum funding standards for defined benefit pension plans. [citations omitted] contributions of the plan sponsor; the contributions of members; for a local pension plan for police officers and firefighters, the plan's share of state excise taxes that are imposed on insurers19 or local excise taxes that may be imposed on local insurance premiums;20 forfeitures, usually of the sponsor's contributions on behalf of members whose service terminated prior to vesting;21 and the expected investment returns on these contributions and forfeitures, from receipt until payout--will provide adequate funds for the plan's trust to pay all liabilities, or benefits, when due. The benefits include projections and estimates of how many members will become vested; the retirement benefits due based on the members' final compensation levels, years of service, and form of benefit--disability, early retirement, normal retirement, and enhanced retirement benefits, such as from additional accrual rate or additional years of service; and the remaining life expectancies of members when they start receiving retirement benefits.22 19 §§ 175.1215 and 185.105, Fla. Stat. 20 §§ 175.101 and 185.08, Fla. Stat. 21 The Plan seems to preclude a forfeiture of the sponsor's contributions on behalf of even an unvested member. Section 8.03 provides that "[e]very member shall have the right to receive, in lieu of all benefits under the plan, a return of the member's accumulated contributions." If the member terminates with less than five years' service, the member is entitled "to a return of the contributions" without interest. If the member terminates with more than five years' service and elects a lump-sum "return of contributions," the member receives interest. Section 1.01 defines "accumulated contributions" as "the sum of all amounts deducted from a member's compensation or picked up on behalf of a member." Section 4.01 states that Respondent "shall pick-up, rather than deduct from each member's pay," specified percentages of pensionable earnings, so the pick-up amount appears to be Respondent's contribution on behalf of a member. As discussed below, this case presents another category of forfeitures--members' payments for additional accrual rate that cannot be applied due to insufficient years of service at the time of retirement. 22 See, e.g., Vinson & Elkins, 99 T.C. at 13 ("The amount estimated to fund a defined benefit plan is calculated by the plan's actuary and is determined based upon actuarial assumptions about a number of future events, such as rates of return on investments, the benefit commencement date, future earnings, and member mortality, among other things."). This case involves an optional enhanced retirement benefit in the form of additional accrual rate. As noted below, eligible members have previously been able to purchase additional accrual rate, but this case concerns a pricing change that went into effect for police officers hired after January 1, 2006, and firefighters hired after January 1, 2007.23 Section 8.08 authorizes such persons to purchase up to five years' additional accrual rate--so as to add 3.2% accrual rate to the Plan's 3.2% accrual rate, for a total 6.4% accrual rate--for each year of service that the member completes from his or her 16th through 20th years of service or, if fewer than five years' accrual rate is purchased, for the purchased number of years constituting the final years of service within the 16th through 20th years of service.24 Taking the example in paragraph 6, if a member purchased five years' additional accrual rate and retired with 20 years of service, the benefit would be $40,000 annually or $3333 monthly.25 In this illustration, the enhanced retirement benefit would increase the member's monthly benefit by $666 and would produce a retirement benefit, at 20 years' service, that would be the equivalent of the retirement benefit, at 25 years' service, without the additional accrual rate purchase.26 23 The difference of one year reflects the one-year difference in the commencement date of each union's collective bargaining agreement. 24 Section 8.08 does not so clearly limit the member purchasing fewer than five years' additional accrual rate to the corresponding number of years in the member's 16th through 20th years of service, but the parties seem to share this interpretation. Thus, it appears that a member purchasing three years' additional accrual rate would be required to apply the additional rate to the member's 18th through 20th years of service. 25 The 3.2% accrual rate for the first 15 years at $50,000 would produce an annual benefit of $24,000, and the 6.4% accrual rate for the final five years at $50,000 would produce an annual benefit of $16,000. 26 The total annual benefit of $40,000, as calculated in the preceding footnote illustrating the effect of five years' additional accrual rate, is identical to the total annual benefit of a 3.2% accrual rate for 25 years at $50,000. Section 8.08 imposes three conditions on the purchase of additional accrual rate. The member must have been employed as a police officer or firefighter with Respondent for at least one year, the member "must exercise this option within [90] days after completion of probation," and the member "shall contribute the full actuarial cost of the benefit for each of year enhanced multiplier purchased," which the member may pay over ten years or prior to entry into DROP,27 whichever occurs first. During the time in question, it appears that probation ran one year from the date of hire. Section 8.07 authorizes an eligible member to purchase additional years of service based on prior years of service with certain employers, such as the military or other law enforcement agencies. Section 8.07 limits this "buyback" of prior service to four years' qualifying service and requires a member to pay 8.4% of the member's current annual compensation for each year of prior service purchased. Section 8.07 allows a member five years to pay the purchase price and limits a member to the purchase of no more than a total of five years' additional accrual rate and additional years of service. Nomenclature problems render some of the minutes of Board meetings discussed below difficult to understand. The problem starts with "AAS," which misleadingly refers to "service," not rate, so as to encourage the reference to the purchase of additional accrual "rate" as the purchase of "service," which properly applies only to the purchase of additional years of service. The confusion is compounded by the use of the term, "buyback" to apply to the purchase of additional accrual rate, as well as to the purchase of additional years of service. The sense of reacquisition in the term, "buyback" limits its use to the purchase of additional years of service, because a member is not reacquiring anything when she purchases additional accrual rate. The Plan appropriately describes the purchase of additional years of service as a "buyback," but does not use this term to describe the purchase of 27 DROP is the Deferred Retirement Option Program. additional accrual rate, although the Plan elsewhere uses "buyback" to refer to the purchase of both additional years of service and additional accrual rate.28 Distinguishing between these two enhanced benefits was less important for police officers hired on or before January 1, 2006, and firefighters hired on or before January 1, 2007. For them, each year of additional accrual rate cost 8.4% of compensation and payment of the purchase price was limited to five years--the same terms that applied and apply to the purchase of each year of additional service. Another common feature between the two optional benefits is their monetary value to the member. At all material times, for identically situated members, the purchase of an additional year of accrual rate has resulted in the same increased benefit as the purchase of an additional year of service.29 Respondent introduced the 2005 and 2006 changes to end its subsidy of members' purchases of additional accrual rate,30 but obviously chose not to end its subsidy of members' purchases of additional years of service--an option that is obviously available only to new hires with qualifying past employment. Calculating the full actuarial cost of additional accrual rate should not have been inordinately difficult. Compensation levels for the members would have been relatively easy to project due to the nature of their 28 § 1.01 ("Accumulated contributions shall … include buy-back amounts paid under sections 8.07 and 8.08."). 29 Assume that the members are the same age, retire on the same date with 20 years of service, commence benefits at retirement, and earned $50,000 at all times during employment with Respondent. As noted above, the annual retirement benefit for such a member who did not purchase additional accrual rate or additional years of service would be $32,000. The purchase of one year of additional accrual rate would raise the member's annual retirement benefit to $33,600: ($50,000 x 19 years x .032) + ($50,000 x 1 year x .064). The purchase of one year of additional year of service also would raise the member's annual retirement benefit to $33,600: ($50,000 x 21 x .032). 30 Minutes of Board meeting on Aug. 27, 2007. employment with expected raises based mostly on years of service. Normal retirement under the Plan is the earlier of 25 years of service or 52 years of age with at least ten years of service, and there is no mandatory retirement age.31 A member's age at retirement would not have been difficult to project due to the necessity that, for additional accrual rate, a member must work at least through her 16th through 20th years of service and the knowledge of the age of a member at the time of her employment. A member's age at retirement is especially important because a lifetime enhanced monthly benefit of, say, $666 is far more costly to the Plan, for a member who is 52 years old at retirement than for a member who is 70 years old at retirement, given the large difference in remaining life expectancies between these two retirees. With this information, coupled with standard mortality tables and an assumed investment return, an actuary could readily determine the sum required to support the enhanced monthly benefit payment. Estimating the contribution required to generate the sum determined in the preceding paragraph also should have been straightforward. If a member paid the contribution in a lump sum, the main task would be settling upon a reasonable investment return from the contribution until payout, more than 19 years later. If a member paid the contribution by installments over ten years, the investment return would apply to each payment, upon receipt, as payments made in the first year would produce more total investment return than payments made in the tenth year. As detailed below, two issues emerged that interfered with the rollout of the revisions to the purchase of additional accrual rate. The first issue, which was first seen in April 2007, was whether a vested member forfeited her payment or payments if she retired prior to the 16th through 20th years of service. If a member forfeits her payment or payments, an actuary could 31 § 6.01. consider projected forfeitures in calculating the full actuarial cost of the additional accrual rate purchase; this would lower the cost to a member, whose enhanced benefit would be partly paid by such forfeitures. This issue may have been more theoretical, unless the Plan had had sufficient experience with such forfeitures to allow an actuarial assumption as to the amount that would be forfeited over a specific interval. In any event, Plan provisions clearly would have supported the Board's determination that such forfeitures were not permitted by the Plan.32 The second issue, with which the Board wrestled from at least September 200833 through February 2009,34 is whether a member who pays the full actuarial cost by installments must pay interest on the installments. This issue raises questions about the communications between the Board and its actuaries,35 who, if asked, should have promptly advised the Board that their actuarial calculations already captured the time value of money, so as to dispense with the necessity of charging interest.36 32 See footnote 21. 33 Minutes of Board meeting on Sept. 8, 2008. 34 Minutes of Board meeting on Feb. 23, 2009. 35 A couple of years later, relations between the Board and its actuaries were decidedly suboptimal when the actuary informed the Board that his firm would require an additional $100 per calculation of the full actuarial cost of additional accrual rate, the Board told the actuary that his firm needed to live up to its contract, a motion to approve the fee increase died for lack of a second, and the actuary told the Board that the firm would resign, if the Board failed to approve the fee increase. Minutes of Board meeting on Oct. 10, 2011. 36 This assumes that Respondent or the trust did not effectively lend the purchase price to the member--perhaps, to simplify the actuarial calculations--and, if not, that the actuaries made some attempt at pricing the full actuarial cost based on how long the trust held each installment payment. Because the full actuarial costs reflects the amount necessary to produce the defined benefit, the member who pays over ten years already will pay more than the member who pays in a lump sum at the time of purchase; the former's final year's installment payments will support investment return for nine fewer years than any payments in the year of purchase. Charging interest on deferred payments would have imposed duplicative exactions upon the member. Nevertheless, the available minutes do not document how the Board resolved this issue. Given one year's probation for new hires, the above-described changes to Section 8.08 would have applied to police officers starting in 2007 and firefighters starting in 2008. Although Respondent did not enact the first ordinance with these changes until 2008, the operative language had been incorporated into the CBA, which adequately captures the new provisions governing additional accrual rate purchases, so as to permit immediate implementation. The CBA provides: For employees hired after 01/01/2007, modify the Additional Accrual Service (AAS) Buyback percent the employee pays from 8.4% to the actual actuarial cost of the benefit and allow the member to pay for this in 10 years instead of 5 years. Effective 11/01/2006, continue the current prior service credit buyback provision … .[37] The record contains no minutes for Board meetings prior to 2007, but, in minutes of a meeting in early January 2007, the Board recognized that it could not provide a member with the purchase price of additional accrual rate until an actuary calculated the full actuarial cost.38 This was a good start. The next month's Board meeting, though, provided evidence of poor communications with the actuaries on the crucial issue of Plan provisions. In February 2007, an actuary performing an audit of the trust fund complained that the Plan was unclear in its treatment of the "buyback [of] service," and he could not reconcile his determination of the present value of benefits with the same determination by another actuary, who had a different interpretation of this buyback provision. Due to confused use of nomenclature, as described above, it is unclear whether this complaint pertained to additional accrual rate, additional years of service, or both 37 Coyle Ex. 11, Bates Stamp, p. 296. 38 Minutes of Board meeting on Jan. 8, 2007. optional benefits, but, given the recent change as to the accrual rate, it likely pertained to the optional benefit at issue in this case. The response of the Board's counsel was not to refer the actuary to language in the ordinance or a collective bargaining agreement, but to a recommended clarification of the "service buyback" within the Summary Plan Description,39 which, as the name implies, is intended to be merely a synopsis of provisions in the operative Plan, not a source of Plan provisions.40 In a Board meeting in April 2007, a Board trustee asked whether a vested member who terminated service was entitled to a refund of the member's contributions as part of a "five year buyback," which likely referred to the additional accrual rate purchase, as a member may purchase five years of that optional benefit, but only four years of additional years of service. Construing the question to pertain to the purchase of additional accrual rate, Board counsel referred to a Draft Summary Plan Description from October 2006 that provided clearly that such contributions were forfeited if a member elected to receive a retirement benefit prior to the completion of the 16th through 20th years of service, but member contributions were not forfeited if the member elected to receive a refund of all contributions instead of a pension benefit.41 Rather than accept this substantive guidance or argue for a different policy, another Board trustee 39 Minutes of Board meeting on Feb. 26, 2007. 40 Nor may a collective bargaining agreement have been the sole alternative source of important Plan provisions. On one occasion, the minutes state that an important provision regarding DROP was addressed only in "a contract"--presumably, a collective bargaining agreement--not in any "ordinance," and Mr. Antonio suggested that Respondent and the union enter into a "letter of understanding" on the matter. Minutes of Board meeting of Oct. 15, 2007. 41 Neither the Draft Summary Plan Description nor any written opinion of Board counsel is part of the record. It seems odd that a vested member would not receive a refund of her payments, but an unvested member would. See footnote 22. The last sentence of section 1.01, which defines the "accumulated contributions" that are to be returned to a member, states: "Accumulated contributions shall also include buy-back amounts paid under sections 8.07 and 8.08." responded that Respondent had never adopted this Draft Summary Plan Description. The discussion ended, and the forfeiture issue remained unresolved for an extended period of time, even though Board counsel had provided the Board with an unequivocal opinion that a vested member forfeited her payments, and the implementation of this opinion would not have impacted--i.e., increased--Respondent's contribution, as addressed in Section 3.16. The Board's nondecision on forfeitures deprived the actuaries of important information needed to price the full actuarial cost of additional accrual rate purchased. Poor communications with the actuaries may have resulted from direct communications that they received, not from Board representatives, but from representatives of Respondent. At times during the hearing, Petitioners' witnesses described how well the Plan was administered when Respondent's employee, Marc Antonio, was available to prepare cost worksheets for the optional benefits and help new hires complete their applications. In 2007, Mr. Antonio was an assistant City manager; by August 24, 2009, he was in the Finance Department. But Mr. Antonio was still regularly attending Board meetings during the period that the full actuarial cost was in effect, and neither he nor the Board was able to provide this information to interested members. The record does not reveal whether Mr. Antonio contributed to confusion among the actuaries. However, another employee of Respondent did. According to Board minutes in 2018, Mr. Cowley recalled speaking ten years earlier to a former human resources director who had become active in Plan business. Mr. Cowley mentioned to the director the need of the Board to be able to present full actuarial costs to members seeking to purchase additional accrual rate, but any deadlines for producing this information "kept getting pushed back." A Board trustee familiar with the director added that he had "always deferred sharing the specifics of the buyback procedures and had trouble conveying the information to the actuary."42 Nevertheless, in early 2007, the actuaries began to develop a method to calculate the full actuarial cost of the purchase of additional accrual rate. Minutes of a Board meeting on August 27, 2007, reveal that, at the previous month's meeting, the Board had been presented with a draft ordinance, perhaps of the Plan or at least Section 8.08, as well as "buy-back tables" that appear to pertain to the purchase of additional accrual rate for a member who retired at age 52. An actuary referred to these tables as applicable to members purchasing "additional service," but these comments pertain to the purchase of additional accrual rate. Mr. Antonio replied that the "dynamic created by eligibility makes the cost very difficult to … estimate,"43 perhaps accurately commenting on the impact of the member's age at retirement on the full actuarial cost of the optional benefit. The actuary asked that each member seeking to purchase additional accrual rate be required to submit an application. At the time a Board trustee, Mr. Cowley asked for the chart as a guide for all members, even though the chart would overstate the cost for older members at retirement. Mr. Antonio seemed to discourage the broader use of a chart designed for a 52-year-old retiree, but incorrectly explained that, while he thought the chart would be accurate, the benefit and cost could be difficult to explain to members--obviously true if someone tried to explain the cost to a 65-year-old retiree based on a chart prepared for a 52-year-old retiree. The actuary said that she would expand the chart to include older members at retirement, and the Board agreed that members older than the oldest age used in the revised chart would apply for an individual calculation of the full actuarial cost. Mr. Antonio concluded the discussion by saying that he 42 Minutes of Board meeting on Nov. 26, 2018. 43 Minutes of Board meeting on Aug. 27, 2007. wanted "the chart" to be a fixed cost to members with Respondent bearing the financial burden of what he termed, "minor variations in experience." It seems as though Mr. Antonio was referring to the relatively minor cost of preparing a chart, rather than to a directive that the full actuarial cost disregard the age of the retiree--as before, at the expense of Respondent. The actuaries expended considerable time preparing the age-based "Buy Back Tables,"44 and the work proved to be much more difficult than they had initially expected. During a Board meeting in October 2007, the actuary, by letter, asked the Board to approve an increase in actuarial fees for this service from the quoted $2500 to $3000 to $19,424 for 89 hours of work already completed. The letter explained that "the unusual nature of the Plan's buyback provision" had necessitated "much more extensive testing than is required for other plans." Even though this optional benefit should have been rolled out for police officers months earlier, the Board deferred action on the request.45 These are all of the minutes of Board meetings in 2007 that are in the record. For all of 2007, the development of the full actuarial cost of additional accrual rate purchase indisputably remained a work in progress. Regardless, Respondent contends, in derogation of the Board's minutes, that an interested member could, in late 2007, obtain the full actuarial cost of additional accrual rate. In support of this fanciful contention, Respondent produced four exhibits. Respondent Exhibits 1 through 3 purport to be worksheets showing the calculation of the full actuarial cost of additional accrual rate purchased 44 If Mr. Antonio's "fixed cost" reply ended the investigation into charging the full actuarial cost for the purchase of additional service years, this reference to "Buy Back Tables" is to the purchase of additional accrual rate. Otherwise, the tables might pertain to the purchase of additional accrual rate and additional years of service. 45 Minutes of Board meeting on Oct. 15, 2007. by three police officers: John Cameron,46 Marco McAdam,47 and Victor Lynch,48 respectively. In each case, the worksheet indicates that the member had completed probation less than 90 days earlier. The Cameron and McAdam worksheets depict four years' additional service and one year's additional accrual rate, and the Lynch worksheet depicts five years' additional accrual rate. There is no evidence about the authorship of these worksheets or, for the Cameron and McAdam worksheets, that the members were able to purchase the service and rate credit at the prices quoted. Respondent Exhibits 1 and 2 are thus entitled to no weight. By contrast, the Lynch worksheet is supported by Respondent Exhibit 4, which is documentation of actual payroll deductions. Both documents are consistent, showing a total cost of $55,840.50, 260 payroll deductions of $214.77 each, and a start date of October 15, 2007. However, Respondent Exhibits 3 and 4 do not support Respondent's claim that, in the fall of 2007, members were able to obtain the full actuarial cost of additional accrual rate purchases, and, if they failed to do so, it was due to a lack of interest in this optional benefit. Given the timing of the Lynch worksheet and the request of the actuary for Board approval of fees over six times higher than the actuary had quoted for working up the full actuarial cost, the Lynch worksheet likely was a prototype that the actuary prepared in trying to develop a method for calculating full actuarial costs. Noticeably missing from the record is any indication that the calculations for the prototype Lynch worksheet proved reliable or the workup could be used for other members. Judging from the absence of Board-approved purchases the 46 Resp. Ex. 1. 47 Resp. Ex. 2. 48 Resp. Ex. 3. following year, either the Lynch calculations were unreliable or at least premature. Minutes of a Board meeting years later, in November 2018, address the Lynch worksheet. In this meeting, Mr. Dodea told Petitioner Roccisano that Mr. Dodea had found one early calculation of full actuarial cost--a calculation done by actuary, Chad Little, in 2008 for Victor Lynch, which the Board had approved. It seems that Mr. Dodea was off by one year in his description of Respondent Exhibit 3. Aptly, Petitioner Roccisano replied that all that this proved is that Mr. Lynch had found a "different channel" by which to obtain a calculation of the full actuarial cost of his purchase of additional accrual rate.49 The minutes of the Board meeting in January 2008 revealed progress in the preparation of an age chart for determining the full actuarial cost of additional accrual rate for a span of ages at retirement. The Board agreed that any member over the ages shown on the chart should receive an individual calculation.50 The next Board meeting for which minutes are available took place in August 2008, and they confirm that, besides Mr. Lynch, no one had obtained the full actuarial cost of additional accrual rate, so as to be able to make an informed purchase decision. An actuary stated that he would charge $600 for each such "buyback" calculation. Told that members had been waiting "for over a year" for an estimate of the full actuarial cost of a purchase of additional accrual rate, the Board agreed to send the information for these members to the actuary for calculations of their purchase prices. The motion 49 These minutes suggest that, contrary to Mr. Dodea's testimony (Tr., pp. 598, 601), he did not discover the Lynch worksheet on the day prior to the last day of the hearing, but, at best, he "rediscovered" it at that time. Given the treatment of the Lynch worksheet, Respondent's failure to disclose the existence of this exhibit in a more timely fashion is immaterial. 50 Minutes of Board meeting on Jan. 14, 2008. that passed specifically approved sending the information for members who "are past their one year anniversary since 9/30/06 through 9/30/08."51 In September 2008, a Board trustee raised the issue of interest on installment payments for "buyback purchases" and stated that the installment payments must not impact the trust assets. "Buyback purchases" may refer to the purchase of additional accrual rate, additional years of service, or both. Interest on the purchase of additional years of service makes sense, because 8.4% per year purchased does not seem to reflect the time value of money. Again, the full actuarial cost of additional accrual rate purchased should reflect the time value of money, although nothing in the record clearly confirms that actuaries calculated a considerably higher full actuarial cost for installment payments than for a lump sum.52 This issue should have been resolved at this time--ideally based on the approach of the actuary calculating the full actuarial cost, but practically with a decision either to charge interest or not to charge interest. Instead, as detailed below, this issue lingered, unresolved, until February 2009. The same Board trustee raised the forfeiture issue by suggesting that members be allowed to obtain a refund of their payments toward additional accrual rate, presumably if they were unable to qualify for the rate due to insufficient years of service. The minutes state: "The City does not agree, 51 Minutes of Board meeting on Aug. 11, 2008. 52 Nine years later, in 2017, an actuarial letter prepared for Petitioner Manny Gonzalez alludes to this issue. Coyle Ex. 1, Bates Stamp, p. 5. The letter quotes nearly $80,000 as the cost of five years' additional accrual rate for retirement benefits commencing 11 years later. Given that the full actuarial cost likely approximated Mr. Gonzalez's annual salary, the letter unrealistically "recommend[s] … payment … be made as a lump sum within six months of the request." This seems like wishful thinking by the actuary, but was it to spare the actuary the task of recalculating the full actuarial cost if paid over ten years, running a simple installment payment plan with interest, running a simple installment payment plan without interest (and ignoring the time value of money), or avoiding the interest issue with Respondent? until they can resolve a separate issue related to interest on buyback payments over time." This quote marks the end of a documented, evidently brief discussion about interest and forfeitures--over one-and-one-half years after the Board initially referred the matter to its actuaries. The Board does not explicitly defer to Respondent's objection to refunds and claim that it must resolve the interest issue, but, characteristically, the Board took no action. At this point, both of these issues were overripe for resolution,53 and the Board's failure to proceed appears at least partly attributable to Respondent's refusal to agree--even though, two years earlier, Respondent had completed its relevant work when it incorporated the change, in implementable form, in the CBA. The next Board meeting for which minutes are available took place in January 2009. The actuary discussed the calculations of the full actuarial cost of additional accrual rate purchases--work that was still "in the process." Someone asked whether a vested member would receive a refund of the purchase price if the member's services terminated, presumably prior to the 16th year of service. The Board attorney said that the member would receive a refund, but Mr. Antonio disagreed, adding that Respondent was negotiating this issue with the unions. A Board trustee raised the issue of interest, and Mr. Antonio replied that Respondent was negotiating this with the union. No one on the Board displayed the initiative to resolve the issues at this time. A Board trustee mentioned that two persons were "currently buying back time" and were not paying interest. Once again, a lack of clarity with nomenclature precludes a finding that Mr. Lynch had been joined by 53 It seems that these issues should have arisen and been resolved under the prior Plan provisions authorizing the purchase of either optional benefit at 8.4% of compensation per year purchased, even though the maximum repayment period for both options was only five years. It is unclear if the provision as to the 16th through 20th years of service previously applied to the purchase of additional accrual rate, but, if not, the forfeiture issue would have arisen at least when an unvested member terminated service. another lucky member; again, a member "buys back time" when purchasing additional years of service and buys rate when purchasing additional accrual rate. Rather than resolve the issue, the Board agreed on an impractical temporary fix: to provide members with two purchase prices--one with interest and one without interest. At the end of the minutes, a Board trustee noted that new employees did not know the cost of additional accrual rate, and the "Board must first retain an actuary"54--precisely what the Board had done two years earlier. At the Board meeting on the following month, the same Board trustee complained about the "buyback" calculations that had recently been completed for 14 members. Because Respondent had failed to indicate whether these installment payments would be charged interest, the calculations were done in the alternative, and the difference between each pair of calculations was "huge," thus demonstrating the impracticality of this "solution." However, this discussion concluded with an observation that "[s]ome members have already started buying back time."55 At a meeting in August 2009, the Board deferred the approval of "buyback statements" that had been prepared by an actuary.56 At the Board meeting the following month, the Board discussed a request of a member currently "buying back time." Without terminating employment, the member wanted to stop the purchase and obtain a refund of all payments previously made. The member added that he was under the old purchase price of 8.4%, suggesting that he was purchasing additional accrual rate, not years of service. The Board deferred action, but relieved the member from the responsibility of making further payments.57 54 Minutes of Board meeting on Jan. 5, 2008. 55 Minutes of Board meeting on Feb. 23, 2009. 56 Minutes of Board meeting on Aug. 24, 2009. 57 Minutes of Board meeting on Sept. 29, 2009. The next Board meeting for which minutes are available took place in January 2010. Board counsel informed the Board that the actuary had increased the cost of a calculation of additional accrual rate purchase to $350, but all other calculations would remain $100 per calculation.58 It seems, finally, that the Board had sorted out the remaining problems that had prevented the presentation of the full actuarial cost to a member purchasing additional accrual rate. By mid 2010, another issue had arisen, though. In July 2010, the Board considered the timeliness of a request to purchase an optional benefit relative to the expiration of probation. As noted above, a request for either optional benefit must be filed within 90 days of the completion of probation. An employee of the Board or Respondent advised the Board that members had been told to wait to purchase additional years of service until Respondent entered into a new collective bargaining agreement with the unions and, now that the parties had concluded a new agreement,59 the members wanted to proceed with their purchases of additional years of service. The Board agreed that it would allow these purchases to take place, but would need a list of these members.60 In August 2010, the Board was informed that a vested member had complained to the Florida Division of Retirement that, upon termination of employment, he had not received a refund of his payments for additional accrual rate. The Board declined to change its earlier decision, which evidently was not to refund the payments. In response to the business taken up at the July 2010 meeting, Mr. Dodea distributed a list of members who 58 Minutes of Board meeting on Jan. 11, 2010. 59 It is possible that a new collective bargaining agreement had resolved the issues of forfeitability of payments for additional accrual rate by a vested member and whether the installment payments bore interest. But the record contains no collective bargaining agreements subsequent to the CBA. 60 Minutes of Board meeting on July 12, 2010. wanted to purchase additional years of service, even though they were past 90 days from the end of their probation. Board counsel advised the Board that this process was being undertaken because, when the probation had ended for these members, a "final contract" was not in place.61 In any event, in October 2010, Board counsel presented lists of members who wanted to purchase additional accrual rate or additional years of service, but who were past 90 days from the end of their probation. The minutes reflect that Respondent had questioned by what authority the Board could "impasse [bypass?] the Ordinance," which probably means disregard the 90-day limitation periods, and Board counsel replied that Respondent would not have to amend the ordinance to authorize this extension of these two 90-day deadlines. Apparently mollified, Respondent insisted that the Board communicate a firm deadline to members by which they would have to elect one or both options. In other related business, the actuarial firm reported that it had completed its "first buyback calculation." But the actuary asked if the calculation was based on the member's base pay or pay with benefits. Suggestive of a program that was rolling out, finally, the Board told the actuary to use base pay--and not to charge interest on the installment payments.62 In April 2015, Board counsel stated that letters that the Board had sent to eligible members "a couple of years ago," advising them of the 61 Minutes of Board meeting on Aug. 23, 2010. Regardless of the status of any effort to document a collective bargaining agreement, the law unsurprisingly requires that, at all times, the provisions of a pension plan of the type at issue be documented, not open-ended. Section 175.261(2)(a)1. requires an annual filing with the Division of Retirement of "each and every instrument constituting or evidencing the plan." Chapter 175 applies to firefighters, and this requirement applies to "local law" plans, not "chapter" plans, which merely incorporate the relevant provisions of chapter 175. See § 175.032(4), (14) (definitions of "chapter plan" and "local law plan"). Similar provisions govern police pensions. See § 185.221(2)(a)1. 62 Minutes of Board meeting on Oct. 11, 2010. reopening of the window to purchase optional credit, had limited the reopening to the purchase of additional years of service. As noted above, four and one-half years earlier, the Board had approved such letters to members interested in purchasing either option. It seems that Board staff or the pension services representative had taken two years to mail or email these letters and had mistakenly dropped the option for the purchase of additional accrual rate. Board counsel asked if the Board wished to reopen the window for members interested in purchasing either option, and the Board agreed to do so.63 In May 2015, the Board clarified that, when the purchase window was reopened, the purchase price for additional years of service would be based on the member's current income, not the member's income in 2010.64 In its August 2015 meeting, Board staff informed the Board that buyback applications for the purchase of additional accrual rate and additional years of service had been emailed to all members with a deadline of September 18, 2015. Board staff advised that it would forward timely filed applications to the actuary for the calculation of the purchase price and then forward the price to the member, who would decide whether to complete the purchase.65 Minutes of the next month's Board meeting indicate that this process was continuing.66 In its August 2018 meeting, the Board was addressed by Petitioner Roccisano, who complained that the purchase price that he had been given for additional accrual time was based on current conditions, not the conditions when he first had the right to purchase additional accrual rate. By now a former Board trustee, Mr. Cowley confirmed that "the City" never 63 Minutes of Board meeting on Apr. 6, 2015. 64 Minutes of Board meeting on May 18, 2015. 65 Minutes of Board meeting on Aug. 24, 2015. 66 Minutes of Board meeting on Sept. 30, 2015. decided on the cost method, which "prohibited" a member from completing a timely purchase of additional accrual rate.67 Its own minutes reveal a Board that, sluggish, reactive, and aimless, failed to discharge its responsibility to implement the revision in the Plan requiring that members pay the full actuarial cost of additional accrual rate purchased. There were suggestions during the hearing that perhaps problems with certain actuaries or certain plan services representatives impeded this effort, but these advisors, like Board counsel, served the Board, and, if they failed to discharge their duties, it was the Board's job to replace them promptly with professionals who would timely do their jobs. From the minutes, the more prominent problem involving a third party was Respondent--specifically, the Board's reliance on Respondent's approval for administrative decisions that are assigned to the Board, not the Plan's sponsor. Respondent discharged its responsibilities with the documentation in the CBA of the changes to the purchase of additional accrual rate, as later enacted in Section 8.08, but the Board failed to discharge its responsibilities in the timely implementation of these changes--for years, not weeks or months. For these reasons, the Board prohibited members from purchasing additional accrual rate at all material times. On the other hand, no Petitioner ever submitted to the Board a request to purchase additional accrual rate in writing or at a Board meeting. 67 Minutes of Board meeting on Aug. 13, 2018. These comments get to the crux of the dispute from the perspective of Petitioners. They do not merely seek another reopening of the window to purchase additional accrual rate; now that this purchase is priced at full actuarial cost, Respondent may not even oppose such a remedy. Petitioners want to purchase additional accrual rate at the full actuarial cost, but as it would have been calculated when each petitioner first became eligible to purchase additional accrual rate--say, 12 or 13 years ago, not now. This administrative proceeding cannot reach such an issue. The Board did not contract with DOAH to address this issue and such a remedy likely represents damages, which are reserved for the judicial branch, not the mere application of basic principles of actuarial science, where investment returns, like time, wait for none of us, even the ever-youthful Petitioner Roccisano. The facts pertaining to each Petitioner are very similar. While still on probation, each Petitioner learned from more senior police officers or firefighters about the optional benefit for the purchase of additional accrual rate. If a police officer, the Petitioner contacted Mr. Cowley; if a firefighter, the Petitioner contacted Jim Bunce. Mr. Cowley was a Board trustee at all material times until at least early 2010. Mr. Bunce became a Board trustee by September 29, 2009, and remains on the Board; from 2007 until 2020, Mr. Bunce was the district president of the firefighters' union. Prior to the expiration of 90 days following the end of probation, each Petitioner contacted Mr. Cowley or Mr. Bunce, depending on whether Petitioner was a police officer or firefighter, and asked about purchasing additional accrual rate. In each case, Mr. Cowley or Mr. Bunce told the Petitioner that the optional benefit was not available due to problems in calculating the cost of the benefit and the absence of a procedure for applying for the benefit; each Petitioner was advised--or directed--to be patient. Sometimes, a Petitioner contacted an employee of Respondent, but was told the same thing. Petitioners completed their probations from March 12, 2008, in the case of Petitioner Pan, through June 8, 2010, in the case of Petitioner Bruce. At least 12 other members, who completed their probations from 2008 to 2012, are identically situated to Petitioners.
Recommendation It is RECOMMENDED that the Board enter a final order determining that Petitioners have failed to prove that they timely submitted a request to 68 See footnote 2. purchase additional accrual rate in writing to the Board or orally at a Board meeting. DONE AND ENTERED this 11th day of February, 2021, in Tallahassee, Leon County, Florida. COPIES FURNISHED: S ROBERT E. MEALE Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of February, 2021. Michael Allen Braverman, Esquire Michael Braverman, P.A. 2650 West State Road 84, Suite 104 Fort Lauderdale, Florida 33312 Brendan Michael Coyle, Esquire Law Office of Brendan M. Coyle, P.A. 407 Lincoln Road, Suite 8-E Miami Beach, Florida 33139 Teri Guttman Valdes, Esquire Teri Guttman Valdes LLC 1501 Venera Avenue, Suite 300 Miami, Florida 33146 Brett J. Schneider, Esquire Weiss Serota Helfman Cole & Bierman, P.L. 1200 North Federal Highway, Suite 312 Boca Raton, Florida 33432 Garth Bonner (Address of Record) Luis Acosta (Address of Record) Janira Camero (Address of Record) Miguel Cordova (Address of Record) John Faul (Address of Record) Philip Rothman (Address of Record) Yvette de la Torre (Address of Record) Wissem Mejdoub (Address of Record) Gabriel Castillo (Address of Record) Gary di Lella (Address of Record) Robert David Klausner, Esquire Klausner & Kaufman, P.A. 7080 Northwest 4th Street Plantation, Florida 33317 Michelle Rodriguez, Plan Administrator City of Hallandale Beach Police Officers’ and Firefighters’ Pension Plan Foster and Foster Plan Administration Division 2503 Del Prado Boulevard South, Suite 502 Cape Coral, Florida 33904 Pietro G. Roccisano (Address of Record) Anthony Gonzalez (Address of Record) Stephen Sanfilippo (Address of Record) Eric Bruce (Address of Record) David DeCosta (Address of Record)
The Issue The issue in this case is whether Respondent condominium association timely mailed or hand delivered to unit owners either a copy of the annual financial report for the year 2004 or, alternatively, a notice stating that a copy of the report would be provided to any owner, free of charge, upon request.
Findings Of Fact Respondent Eden Isles Condominium Association, Inc. ("Association") is the entity responsible for operating the common elements of the Eden Isles Condominium ("Condominium"), which consists of seven buildings comprising 364 units. As such, the Association is subject to the regulatory jurisdiction of Petitioner Division of Florida Land Sales, Condominiums, and Mobile Homes ("Division"). The Association retained Louis John Claps, C.P.A. & Associates, P.A. ("Claps") to audit the Association's books and prepare a financial statement respecting the year ending December 31, 2004. Thereafter, under a cover letter dated May 2, 2005, Claps delivered to the Association a financial report for the year 2004. This financial report was readily available to the members of the Association's governing Board of Directors ("Board"), who in turn could make copies thereof for delivery to the unit owners in their respective buildings. (The owners in each building elect a "building director" to serve on the Board.) In addition, the financial report was available for inspection and copying at the Association's office; any unit owner who asked for a copy was given one. The Association, however, did not mail or hand deliver to each unit owner either a copy of the financial report or, alternatively, a notice stating that a copy of such report could be had, at no charge, upon request.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division enter a final order finding the Association guilty of the charge of failing to timely provide each unit owner with either the annual financial report for the year 2004 or, alternatively, a notice stating that a copy of such report would be delivered, without charge, to any owner who requested one. In consequence of the Association's violation of Section 718.111(13), Florida Statutes, the Division should: (a) impose a civil penalty against the Association in the amount of $1,092; (b) order the Association to mail or hand deliver to each unit owner, within 30 days after the date of the Final Order, either a copy of the financial report for the year 2004 or, alternatively, a notice stating that a copy of such report will be provided at no cost to any owner who requests one in writing; and (c) order the Association to furnish the Division, within 45 days after the date of the Final Order, with an affidavit attesting that the remedial action just described has been taken. DONE AND ENTERED this 11th day of May, 2007, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of May, 2007.
The Issue Whether the application of Petitioner Florida Cities Water Company, to increase the ratios it charges customers for water service in Lee County should be granted. CONCLUSIONS and RECOMMENDATION Conclusions: Factors pertinent to ratemaking and enumerated in Section 367.081, Florida Statutes, have been considered in this pro- ceeding. The Petitioner utility has not justified use of "year-end" rate base; those adjustments which it has supported with a preponderance of evidence have been accepted, those lacking sufficient eviden- tiary support have been rejected. Peti- tioner's application for rate increase should be granted to the extent provided in this Recommended Order; the resulting rates are just, reasonable, compensatory, and not unjustly discriminatory. Recommendation: That the Commission recalculate adjusted rate base, operating income, and the result- ing additional and total gross revenues in a manner consistent with this Recommended Order, and that Petitioner be authorized to file new rates structured on the Base facility charge concept designed to generate the addi- tional and total annual gross revenues so specified.
Findings Of Fact Based upon the evidence presented at hearing, the following facts are determined: I. The Application By its application, the UTILITY seeks authority to increase its rates sufficiently to generate additional annual gross revenues of $1,483,300. It attributes the need for increased revenues to extensive additions recently made to its water plant pursuant to COMMISSION Order No. 6209 entered in Docket 74176-W. The UTILITY claims that the increased investment and higher operating expenses associated with such plant additions effectively reduce its rate of return to 4.2 percent; it asserts that the requested additional revenues are necessary to allow it to earn a fair and reasonable rate of return of 12 percent. (Testimony of Reeves, Cardey; P-2, P-8.) II. Rate Base There are three issues involving the proper determination of rate base in this case: (1) whether "year-end", rather than "average" rate base should be used, (2) whether an Allowance for Funds Used During Construction (AFUDC) for post-test period additions allowed in rate base is proper, and (3) whether connection fees collected from 1969 to 1973 should be recorded as Contributions in Aid of Construction (CIAC) "Year-end" v. "Average Rate Base In determining rate base, absent extraordinary or emergency conditions or situations, "average" rather than "year- end" investment during the test period should be used. City of Miami v. Florida Public Service Commission, 208 So.2d (Fla. 1968). The Florida Supreme Court has suggested that average investment "should not be departed from except in the most unusual and extraordinary situations where not to do so would result in rates too low as to be confiscatory to the utility." Id. at 258. Year-end investment may be used only when a utility is experiencing extraordinary growth. Citizens v. Hawkins, 356 So.2d 254 (Fla. 1978). The UTILITY has not established that it meets the standard for utilization of "year-end" rate base, i.e. , that it has experienced unusual and extraordinary growth. Its customer growth rate averaged 8.2 percent for the last seven years, with a 10.56 percent gain during the test year. This growth rate has been experienced by many other Florida utilities of similar size and is neither extraordinary nor unusual. Neither is the UTILITY's growth extraordinary when measured in terms of water sold. Between 1975 and 1979, its growth in water sales averaged approximately 11 per- cent, in 1980--6 percent. In terms of plant growth, the UTILITY averaged 19.37 percent over the last seven years; the growth rate for 1979 was 12.03 percent. However, in 3980, its investment in gross plant grew at a 33 percent rate. The UTILITY's growth rate was repeatedly described as "substantial" by its consultant, K. R. Cardey, but substantial growth does not equate to extraordinary or unusual growth as defined by the Florida Supreme Court. Furthermore, the UTILITY did not establish that failure to use "year-end" rate base would reduce its rates to a confiscatory level. See, City of Miami, supra. It follows that "average" investment during the test period is the proper method to utilize in determining rates in this case. (Testimony of Cardey, Deterding.) Appropriateness of Allowance for Funds Used During Construction (AFUDC) After the test period, the UTILITY completed five major additions to its plant, all of which were required by previous order of the COMMISSION. (Order No. 6209, Docket 74176-W.) The COMMISSION agrees that, since it required these post-test period additions, they should be included in rate base at full weight. Since these additions, which total $5,966,569, were under construction during the test period, the COMMISSION contends they should be recorded as Construction Work in Progress (CWIP). The UTILITY agrees that these additions should be included in rate base but seeks to include, as well , an AFUDC allowance in the amount of $326,422.2 AFUDC represents interest that was capitalized on each of these additions while they were under construction during and after the test period. Since these additions are already included in rate base at full weight, the inclusion of AFUDC in rate base would allow the UTILITY to duplicate earnings on its investment. Such a result would be unreasonable, improper, and should not be allowed. (Testimony of Reeves, Deterding; P-1, P-3, P-10, R-2.) Connection Fees: CIAC or Revenue From 1969 through 1973, the UTILITY operated under the regulatory jurisdiction of Lee County, not the COMMISSION. During those years, it was the UTILITY's practice and policy to record connection fees, which totaled $226,582, as revenue, not CIAC. Since connection fees are ordinarily considered CIAC, the COMMISSION proposes to adjust CIAC by $226,582. (Testimony of Deterding, Cardey; P-8, R-2.) Contributions in Aid of Construction are defined as monies used to offset the acquisition, improvement, or construction cost of utility property used to provide service to the public. Section 367.081(2), Florida Statutes (1980). The UTILITY's consultant testified that connection fees collected and credited to revenue by the UTILITY during 1971, 1972, and 1973, totaling $176,773, were "not used to offset the improvements or construction costs of the [UTILITY's] property. (P-8, p. 6.) The COMMISSION, on cross-examination, did not question the accuracy or impeach the credibility of this statement; neither did it present any evidence to controvert or rebut the UTILITY's assertion as to how the connection fees were used. The only evidence on the question presented by the COMMISSION consisted of its accountant's conclusion: "During the years from 1969 to 1973, Florida Cities Water Company recorded many tap-in fees collected as revenue. These should properly be recorded as contributions in aid to construction. This adjustment [of $226,582] adds these contributions." p. 5.)(Testimony of Deterding, Cardey; P-8, R-2.) In its Proposed Recommended Order, the COMMISSION asserts that the UTILITY has the burden of showing: (1) the correctness of collecting funds normally authorized for service availability and using them for another purpose, and (2) the exact manner in which the funds were used. (Proposed Recommended Order, p. 6.) However, there was no evidence in the record to show that the UTILITY's treatment of connection fees during 1971 through 1973, was incorrect or violative of Lee County's regulatory standards. Neither is there any evidence to show that the connection fees collected in those years were used as contributions in aid of construction, i.e., to offset acquisition, improvement, or construction costs. The only evidence presented as to how those fees were actually used was that of the UTILITY's consultant; he testified that those funds were used only to defray operation and other expenses associated with the new customers. This evidence was sufficient to shift to the COMMISSION the burden of presenting evidence on the question or discrediting the evidence presented by the UTILITY. The COMMISSION did neither. It is found, therefore, that the $176,773, representing connection fees collected between 1971 and 1973, do not constitute CIAC, the UTILITY's testimony in this regard being persuasive. (Testimony of Cardey, Deterding; P-8, R-2.) However, as to the years 1969 through 1970, the UTILITY presented no evidence that the $48,809 in connection fees collected during that time were used only for operating and maintenance expenses and not to offset acquisition, improvement, or construction costs. In the absence of such evidence, the COMMISSION testimony that connection fees should ordinarily be treated as CIAC is persuasive. The connection fees collected during 1969 and 1970, calculated to be $49,809, are therefore properly included as CIAC. (Testimony of Deterding, Cardey; P-8, R-2.) In light of the above findings and the absence of disagreement concerning other adjustments proposed by the COMMISSION, the elements of the UTILITY's adjusted rate base are: RATE BASE Test Year Ended March 31, 1980 Utility Plat in Service $ 11,178,094 Construction Work in Progress 5,966,569 3/ Accumulated Appreciation (626, 160) CIAC,(Net of Amortization) (3,041,747) 4/ Advances for Construction (111,567) AFUDC (326,422) 5/ Working Capital Allowance 146,911 Materials and Supplies 117,450 Income Tax Lay [To be calculated based on additional gross revenues rec- opmended herein.] RATE BASE [To be determined upon recalculation.] In order to determine the adjusted rate base which should be utilized, Income Tax Lag requires recalculation in a manner consistent with the above findings and Section III below. (Testimony of Cardey, Deterding; P-1, P-3, P-8, P-10, R- 2.) III. Operating Income Operating Expense: Water Royalty Charge In calculating operating income for the test year, the UTILITY included $18,577 as an operating expense attributed to a $.03 per gallon royalty charge it paid an affiliate for water pumped from the Green Meadows well field. The UTILITY operates this water field on a 21-acre site and has easements to locate 26 wells. It pays no other cost for the water. The COMMISSION disputes the reasonableness of this charge because it is not an arms-length transaction, and the UTILITY has not explained the basis of the $.03 charge, the cost to the affiliate of the land involved and its subsequent sales price (the affiliate reserving the water use rights) , and the identity of the present owner. The COMMISSION's accountant testified that reasonableness of the charge could be determined by analyzing the costs of the rental of the land based on the original cost of the property to the affiliate. In response, the UTILITY established that the $18,577 expense is less than it would cost tide UTILITY, in terms of annual revenue requirements, to purchase the land involved. But the UTILITY failed to address the cost of renting the property, based on the affiliate's acquisition costs, or furnish information necessary to make such a determination. The COMMISSION is entitled to clearly scrutinize the expenses claimed by a utility and require that their reasonableness be shown. Tide UTILITY did not adequately explain or support the reasonableness of its claimed royalty expense, and it should therefore be disallowed. (Testimony of Reeves, Deterding; P-6, R-2.) Depreciation and Taxes: Adjustments Attributable to Post-Test Period Plant Additions The parties disagree on whether adjustments should be made to test year operating expenses to reflect increases in depreciation and taxes due to the five post-test year plant additions completed subsequent to the test period. The evidence is uncontroverted that these plant additions, including the Green Meadows water treatment plant and related facilities, were required by prior COMMISSION order and that they were necessary to provide service to existing customers of the UTILITY. The parties have also agreed that the full cost of these additions should be included in rate base, at full weight. The operating expenses of the UTILITY during the test year should be adjusted as was rate base, for known and no net changes in order to reflect conditions which will prevail when the rates become effective. The UTILITY's 2.1 percent composite depreciation rate should thus be applied against the new plant additions, and tide resulting depreciation expense included in the cost of providing service. Similarly, taxes (other than income) on the $5,960,569 worth of plant additions are known and eminent, are a cost of providing service, and should be included as an adjustment to test year taxes. The COMMISSION presented no policy or factual justification or explanation for its opposition to these adjustments to test year operating expenses. It does not contend that these expenses are other than known and eminent, attributable to the government-ordered plant additions, and will be part of the cost of providing service during the period the new rates will be in effect. The UTILITY's evidence in support of these adjustments is therefore persuasive. (Testimony of Cardey, Deterding; P-1, P-8, P-10, R-2.) Similarly, the UTILITY contended that test year income tax should be adjusted to reflect changes in revenue, operating expenses, depreciation, taxes, and interest expenses attributed to operation of the new plant addition. The COMMISSION offered no reason or explanation why such an income tax adjustment should not be made; changes in income tax due to the operation of the plant additions are known and eminent, and should be allowed as adjustments to test year expenses in order to adequately represent the UTILITY's future costs of service. However, due to the findings herein relating to use of "average rate base, the AFUDC allowance, treatment of connection fees previously collected, the water royalty charge, depreciation, and taxes, the income tax adjustment proposed by the UTILITY requires recalculation. (Testimony of Cardey, Deterding; P-1, P-0, P-10, R-2.) In light of the above findings, and the UTILITY's lack of opposition to other adjustments proposed by the COMMISSION, the known elements of adjusted operating income are: operating revenues of $2,419,437 and operating expense (operation) of $1,175,291. In order to determine adjusted operating income which should be used in this case, depreciation, taxes other than income, and income taxes require recalculation consistent with the findings contained in Sections II and III, infra. (Testimony of Cardey, Deterding; P-1, P-8, P-10, R- 2.) IV. Capital Structure, Cost of Capital, and Rate of Return The parties agree that UTILITY's capital structure and cost of capital are as follows: CAPITALIZATION COMPOSITE WEIGHT Rate 15 pct. 16 pct. Long-Term Debt 49.33 pct. 10.68 pct. 5.27 pct. 5.27 pct. Equity Capital 41.25 15-18 6.19 6.60 Subtotal 90.58 pct. 11.46 pct. 11.87 Deferred Federal Income Taxes 4.74 pct. -0- -0- -0- Customer Deposits .90 8.00 .07 .07 subtotal 96.22 Investment Tax Credit 3.79 pct. Average 11.53 .45 pct. 11.94 pct. .45 TOTAL 100.00 pct. 11.98 pct. 12.39 pct. They are also in agreement that a 12 percent return on the UTILITY's rate base, including a 15-16 percent return on equity, is a fair and reasonable rate of return. (COMMISSION's Proposed Recommended Order, p. 7; P-8, P-5.) V. Additional Required Revenues In order to determine the additional gross revenues which the UTILITY should file rates designed to generate, the authorized operating income should be computed by multiplying 12 percent times the adjusted rate base computed pursuant to Paragraph 10 above. The UTILITY should then be authorized to earn additional gross revenues equivalent to thee difference between the authorized operating income and the adjusted test year operating income computed pursuant to Paragraph 14 above. VI. Rate Structure and Rates The UTILITY proposes, with the COMMISSION's concurrence, that its new rates be structured in accordance with the Base Facility Charge Rate Design (BFC) and that the 25 percent surcharge currently imposed on general service customers be eliminated. The new BFC rate structure design contains a customer charge and a gallonage charge, both of which are directly related to the cost of providing the service. The customer charge assures that all customers pay their pro rata share of certain fixed and operating costs of the UTILITY which are not related to the amount of water used by the customer. The gallonage charge is based on the actual amounts of water used. With implementation of the base facility charge system, the UTILITY should lower its current $20 charge for reconnections during working hours to $10; similarly, its current $25 charge for reconnection after working hours should be reduced to $15. These lower charges are sufficient to cover the costs associated with the service rendered. The UTILITY also proposes various increases in its service availability, or connection charges. These increases, based on increased construction costs, will be used to finance additional facilities and stabilize rates to existing customers. The BFC rate design system proposed by the UTILITY is fair, reasonable, and nondiscriminatory. In light of the foregoing, it is unnecessary to consider the "alternative" rate structure which was presented to the COMMISSION staff on the day of hearing. With such time constraints, meaningful review of the "alternative" rate structure proposal was not possible. (Testimony of Byrd, Collier; R-1, R-3.) VII. Adequacy of Service Customer testimony criticized the 25 percent surcharge currently Imposed on general service customers, and the magnitude of the requested rate increase. Several customers complained of the quality of the water supplied. Under the proposed rate structure, tide surcharge on general service customers will be eliminated. While several customers complained of sediment in their drinking water, testimony established that the new Green Meadows softening plant should help alleviate that problem. The water supplied by the UTILITY meets all regulatory and health standards of the Health Department and the Florida Department of Environmental Regulation. The UTILITY is currently under no citation for violation of any regulatory standards. It is found that the quality of the water service offered by the UTILITY is adequate. (Testimony of Collier, Reeves, Customers; P-7.) VIII. Franchise Fees The UTILITY has collected $395,000 in "franchise fees" for Lee County, but has not paid them to the county due to questions surrounding the legality of the franchise fee. Neither have the funds been placed in a special escrow account pending resolution of this controversy. The UTILITY should ensure that such franchise fees are deposited in a special interest-bearing escrow account, and take steps to ensure that this controversy is resolved without further delay. (Testimony of Cardey; Late-filed Exhibit P-12.)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the COMMISSION recalculate adjusted rate base, operating income, and the resulting additional and total gross revenues in a manner consistent with this Recommended Orders and that Petitioner be authorized to file new rates structured on the base facility charge concept designed to generate the additional and total annual gross revenues so specified. DONE AND ENTERED this 27th day of February, 1981, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of February, 1981.
The Issue Whether Respondents violated the statutes and rules alleged in the Second Amended Administrative Complaint; and, if so, what is the appropriate penalty to be imposed against Respondents.
Findings Of Fact OFR is the state agency charged with administering and enforcing chapter 560, Florida Statutes, including part II related to money services businesses. At all times material hereto, Payservices has been a foreign corporation and part II licensee pursuant to chapter 560, specifically a "money services business," as defined in section 560.102(22), and "money transmitter," as defined in section 560.102(23).4/ At all times material hereto, Mr. Danenberg has been the chief executive officer, compliance officer, and an owner of Payservices. As such, Mr. Danenberg is an "affiliated party" and a "responsible person" as defined in sections 560.103(1) and 560.103(33). Count I Licensees, such as Payservices, are required to annually file a financial audit report within 120 days after the end of the licensee's fiscal year. The financial audit report is prepared by a certified public accountant and is used to demonstrate to OFR that the licensee has the financial health to conduct its business and transmit funds within the State of Florida. Payservices' fiscal year ends December 31st. Respondents were required to provide Payservices' 2016 financial audit report to OFR by no later than May 1, 2017. On December 20, 2017, William C. Morin, Jr., OFR's Chief of the Bureau of Registration, contacted Payservices by email with regard to Payservices' failure to timely file a financial audit report within 120 days after the 2016 fiscal year ended. Mr. Danenberg responded by email that same day, telling Mr. Morin that Payservices' accountant had prepared a financial audit report "many months ago," and that it was his "impression" that it had been uploaded to the REAL system "at some point when we filed the quarterly reports." Mr. Danenberg attached to his December 20, 2017, email what OFR accepted as the financial audit report that same day. Notably, the document indicated it was prepared by a certified public accountant on June 15, 2017, after the May 1, 2017, deadline. In any event, Mr. Morin reviewed the REAL system regarding Payservices and determined there were no problems with the REAL system's ability to accept uploaded documents. Mr. Morin testified that he could see on the REAL system that Payservices successfully uploaded a quarterly report and Security Device Calculation Form on January 26, 2017, which created a transaction number. Mr. Morin also observed that Payservices started to upload its financial audit report, which would create a transaction number, but no financial audit report was actually attached and uploaded to the REAL system on January 26, 2017, under that transaction number. According to Mr. Morin, Payservices may have attempted to start to file a financial audit report on January 26, 2017, but it did not complete the transaction because no financial audit report was attached. At hearing, Mr. Morin acknowledged that: "When I looked at the Financial Audit Report transaction, nothing was attached. And I also know that the functionality of the REAL system will kind of allow for the transaction to be completed and nothing attached." Tr. p. 100. Mr. Morin testified that Mr. Danenberg was cooperative when he was contacted on Decemeber 20, 2017, and submitted the financial audit report. The persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not submit their financial audit report to OFR until December 20, 2017, almost eight months after the May 1, 2017, deadline. Count II Licensees, such as Payservices, are required to annually file Form OFR-560-07, Security Device Calculation Form, by January 31st of each calendar year for the preceding calendar year. The Security Device Calculation Form requires licensees to report to OFR the dollar amount of transactions with Florida consumers. The dollar amount of transactions identified in the form is then utilized by OFR to determine if additional collateral is necessary to protect Florida consumers in the event a claim is made against the collateral for monies that were not properly transmitted by the licensee. Andrew Grosmaire, OFR's Chief of Enforcement in the Division of Consumer Finance, acknowledged at hearing that a licensee has 60 days to amend the face value of its surety bond, should an increase be required, and that at all times material hereto, the value of Payservices' surety bond has been correct for the minimum amount required. Nevertheless, Mr. Morin testified that Respondents did not file Form OFR-560-07, Security Device Calculation Form, until February 10, 2018, ten days late. The persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not file Form OFR-560-07, Security Device Calculation Form, until February 10, 2018, ten days late. Count III Licensees, such as Payservices, are required to update information contained in an initial application form, or any amendment to such application, within 30 days after the change is effective. In Payservices' initial application dated September 25, 2015, Respondents identified Corporate Access, Inc., as its registered agent with an address for service of process at 236 East 6th Avenue, Tallahassee, Florida 32303. According to the Department of State, Division of Corporation's records, on January 10, 2017, Mr. Danenberg was appointed as Payservices' registered agent with a new address for service of process at 300 West Palmetto Park Road, A210, Boca Raton, Florida 33432. Respondents filed an amended license application with OFR on August 28, 2017, which still listed Corporate Access, Inc., as the registered agent for service of process. On February 26, 2018, Respondents amended their registered agent information with the Department of State listing a new address for Mr. Danenberg at 14061 Pacific Pointe Place, No. 204, Delray Beach, Florida 33484. Mr. Morin testified that at no time have Respondents updated their initial application with OFR to reflect Mr. Danenberg as the registered agent for Payservices and his address as the registered agent.5/ Mr. Morin and Mr. Grosmaire testified that the reason a licensee needs to update a change in the registered agent's name and address is so that OFR may effectuate service of process against the licensee. Yet, Mr. Grosmaire acknowledged that OFR has access to the Division of Corporation's records. Nevertheless, the persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not update their initial application with OFR to reflect Mr. Danenberg as the registered agent for Payservices and his address as the registered agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that OFR impose an administrative fine against Respondents in the amount of $6,000. DONE AND ENTERED this 16th day of December, 2019, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ 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 16th day of December, 2019.
