09-004909RP American Council Of Life Insurance vs. Department Of Financial Services Status: Closed DOAH Final Order on Friday, October 9, 2009.

Summary: Petitioner did not file a challenge to the proposed rule as initially noticed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERICAN COUNCIL OF )

LIFE INSURANCE, )

)

Petitioner, )

)

vs. ) Case No. 09-4909RP

)

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Respondent. )

)

AMENDED FINAL ORDER ON MOTION TO DISMISS

This case began when Petitioner, American Council of Life

Insurance (ACLI) filed a Petition for Administrative

Determination of Invalidity of Proposed Rule (Petition), seeking

an administrative determination that proposed rule 69B-162.011

is invalid. The case was assigned to the undersigned and a

Notice of Hearing was entered scheduling the hearing for

October 12, 2009.

Paragraph (8) of the Petition alleges that proposed rule

69B-162.011 is an invalid exercise of delegated legislative

authority because the Department of Financial Services

(Department) failed to follow the applicable rulemaking

procedures or requirements, exceeded its grant of rule making

authority, and that the rule enlarges, modifies, or contravenes

the specific provisions of the law implemented, vests unbridled

discretion in the Department, and is arbitrary or capricious.

The Department filed a Motion to Dismiss (Motion) seeking

dismissal of the Petition filed by ACLI. The primary basis for

the Motion is that the Petition was filed untimely. ACLI filed

a response in opposition. Thereafter, the Department filed a

reply to ACLI’s response and ACLI filed a response to the

Department’s reply. 1/

The proposed rule was published May 22, 2009, in Volume 35,

No. 20, of the Florida Administrative Weekly (FAW). A Notice of

Change was published August 14, 2009, in Volume 35, No. 32 of

the FAW. A second Notice of Change was published August 21,

2009, in Volume 35, No. 33 of the FAW. The Petition was filed

September 9, 2009.

The Motion alleges that the Petition seeks to attack

provisions of the proposed rule as initially published, and that

ACLI did not initiate a challenge to the proposed rule as

initially published or to the first notice of change. Regarding

the second notice of change, the Motion further alleges:

5. In the instant cause, the purported

means through which the instant Petitioner

seeks to challenge the entire proposed rule

is the second notice of change. More

particularly, Petitioner complains that the

second notice of change lacks a specific

effective date. . . . Through that

pretextual challenge to the second notice of

change, Petitioner seeks to attack

provisions of the rule long ago published

without challenge.. . . If Petitioner is

substantially affected by those provisions

of the proposed rule now, it was

substantially affected by those same

provisions on publication, but it initiated

no challenge to the proposed rule. The time

for such a challenge has expired.

6. The reason that the second notice of

change provides for no specific effective

date is that no effective date can be

assigned until the proposed rule has been

adopted, which can occur only after all

challenges, such as this one, have been

disposed of. Thus, Petitioner has created

the very impasse to assignment of an

effective date of which it complains and

attempts to use to challenge the entire

proposed rule. If this argument is allowed,

the statutory delimitation of rule

challenges to 21 days after publication will

be rendered meaningless and of no force or

effect.

Section 120.56(2)(a), Florida Statutes (2009), reads in

pertinent part as follows:

Any substantially affected person may seek

an administrative determination of the

invalidity of any proposed rule by filing a

petition seeking such a determination with

the division within 21 days after the date

of publication of the notice required by

s.120.54(3)(a). . . Any person who is

substantially affected by a change in the

proposed rule may seek a determination of

the validity of such change. Any person not

substantially affected by the proposed rule

as initially noticed, but who is

substantially affected by the rule as a

result of a change, may challenge any

provision of the rule and is not limited to

challenging the change to the proposed rule.

(emphasis added)

ACLI responded to the Department’s Motion by asserting that

the Motion is insufficient based upon the “private negotiations

between DFS and ACLI, which negotiation began at the hearing

held on the challenged [sic] on June 16, 2009, and continued

thereafter, regarding the substantive terms and provisions of

the challenged rule, which led ACLI to believe that certain

changes in the challenged rule would be made by DFS. DFS failed

to make such changes in either of the two Notices of Change

filed by DFS.” ACLI then cites as authority Department of

Health and Rehabilitative Services v. Florida Medical Center ,

578 So. 2d 351 (Fla. 1st DCA 1991).

Further, ACLI asserts that DFS’s argument that no specific

effective date is required is insufficient, citing Section 12 of

Senate Bill 2082 (2008), which addresses the effective date of

the implementing rules of the statutory amendment contained in

the bill: . . . and such implementing rules shall take effect

60 days after the date on which the final rule is adopted or

January 1, 2009, whichever is later.”

The Department’s reply to ACLI’s response asserts that

Florida Medical Center is distinguishable from the instant case,

and that the legislatively prescribed effective date of the

proposed rule is either January 1, 2009, or sixty days after

adoption, “which ever is later.” Thus, the Department argues

that the time for assignment of an effective date has not yet

arrived.

Finally, ACLI’s reply to the Department’s response asserts

that the Department misconstrues Florida Medical Center , and

that the proposed rule as initially noticed stated the effective

date as January 1, 2009, and did not “eliminate” that obviously

incorrect date until the second notice of change.

In Department of Health and Rehabilitative Services v.

Florida Medical Center , supra , the hearing officer in the

underlying challenge to a proposed rule found that material

changes to a proposed rule based on off-the-record private

negotiations constituted changes that were in excess of

delegated legislative authority. The First District affirmed,

finding that the appellees’ challenge filed within 21 days

following the agency’s publication of notice of change to a

proposed rule, but more than 21 days following the original

notice of the proposed rule was timely, when the “material

modifications to the rule were predicated upon neither public

hearings nor the record of the proceedings.” 578 So. 2d 351,

354. In contrast, ACLI argues that it was substantially

affected by changes not made to the proposed rule based upon

private negotiations.

The undersigned is not persuaded that the Florida Medical

Center case opens the door to Petitioner herein. ACLI did not

file a challenge to the proposed rule as initially noticed.

Further, the only allegation in the Petition regarding the

second notice of change relates to the deletion of the effective

date of January 1, 2009, relating to the incorporation by

reference of forms, a date that had long passed. The

undersigned is not persuaded that this constitutes a change that

enables Petitioner to then challenge the substance of the rule

as initially noticed, as contemplated by Section 120.56(2)(a),

Florida Statutes.

Finally, any amendment to the Petition would not allow

Petitioner to state a cause of action in this rule challenge

proceeding. See Undereducated Foster Children of Florida v.

Florida Senate et al. , 700 So. 2d 66 (Fla. 1st DCA 1997).

Accordingly, it is

ORDERED:

1. Respondent’s Motion to Dismiss is granted.

2. The hearing scheduled for October 12, 2009, is hereby

canceled.

DONE AND ORDERED this 9th day of October, 2009, in

Tallahassee, Leon County, Florida.

S

BARBARA J. STAROS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of October, 2009.

ENDNOTE

1/ Florida Administrative Code Rule 106.204(1) only authorizes

a response in opposition to a motion and does not contemplate

further pleadings regarding a motion. Notwithstanding, the

reply and response to the reply have been considered.

COPIES FURNISHED:

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0307

Paul P. Sanford, Esquire

Paul P. Sanford and Associates, P.A.

106 South Monroe Street

Tallahassee, Florida 32301

Liz Cloud, Program Administrator

Administrative Code

Department of State

R. A. Gray Building, Suite 101

Tallahassee, Florida 32399

Scott Boyd, Executive Director

and General Counsel

Administrative Procedures Committee

Holland Building, Room 120

Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing the original notice of appeal with the Clerk of the

Division of Administrative Hearings and a copy, accompanied by

filing fees prescribed by law, with the District Court of

Appeal, First District, or with the District Court of Appeal in

the Appellate District where the party resides. The notice of

appeal must be filed within 30 days of rendition of the order to

be reviewed.