02-001951F Hhci Limited Partnership, D/B/A Harborside Healthcare-Pinebrook, D/B/A Harborside Healthcare-Sarasota, D/B/A Harborside Healthcare-Naples vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Thursday, November 21, 2002.

Summary: No legal justification for prosecution of complaint constitutes improper purpose and fees should be awarded.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HHCI LIMITED PARTNERSHIP, d/b/a )

HARBORSIDE HEALTHCARE - )

PINEBROOK, d/b/a HARBORSIDE )

HEALTHCARE - SARASOTA, d/b/a )

HARBORSIDE HEALTHCARE - NAPLES, )

)

Petitioners, )

)

vs. ) Case No. 02 - 1951F

)

AGENCY FOR HEALTH CARE )

ADMINISTRATIO N, )

)

Respondent. )

)

FINAL ORDER

On October 17, 2002, a formal administrative hearing was

held in Tallahassee, Florida, before William F. Quattlebaum,

Administrative Law Judge, Division of Administrative

Hearings (DOAH).

APPEARANCES

Petitioner: Donna H. Stinson, Esquire

Broad & Cassel

215 South Monroe Street, Suite 400

Post Office Box 11300

Tall ahassee, Florida 32302

Respondent: Christine T. Messana, Esquire

Richard J. Saliba, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop No. 3

Tallahassee, Florida 32308 - 5403

STATEMENT OF THE ISSUE

Whether the Petitioners are entitled to an award of

attorneys' fees and costs pursuant to Sections 120.569(2)(e) and

120.595(1), Florida Statutes, and, if so, in what amounts.

PRELIMINARY STATEMENT

This request for fees and costs arose because of separate

Admini strative Complaints filed by the Agency for Health Care

Administration (AHCA) against HHCI Limited Partnership d/b/a

Harborside Healthcare – Pinebrook, Harborside Healthcare –

Sarasota, and Harborside Healthcare – Naples, (collectively

HHCI). The action p roposed by AHCA would have resulted in

revocation of the licensure and closure of three HHCI nursing

facilities pursuant to Section 400.121(3), Florida Statutes.

HHCI challenged the proposed action and requested formal

hearings on the Administrative Compla ints.

HHCI also challenged AHCA's authority to act on grounds

that the cited statute had not taken effect until May 15, 2001,

that AHCA had no authority to retroactively apply the statute,

and that AHCA's policy in doing so constituted an unpromulgated

r ule. The rule challenge proceeding was filed on October 12,

2001, and was assigned DOAH Case No. 01 - 3935RU.

The Administrative Complaint cases were forwarded to DOAH

on October 19, 2001, and were assigned DOAH Case Nos. 01 - 4124,

01 - 4125, and 01 - 4126 (subs equently consolidated under DOAH Case

No. 01 - 4124.)

The Rule Challenge case was heard on October 23, 2001. By

Final Order entered on October 31, 2001, it was held that the

policy of retroactive application of the newly enacted statute

was an unpromulgated rule and AHCA was directed to discontinue

reliance on the policy. AHCA did not appeal the Final Order.

In a separate fee proceeding (DOAH Case No. 01 - 4283F) HHCI was

awarded $65,607.65 in fees and costs related to the successful

rule challenge. The awa rd of fees and costs in the rule

challenge case has been appealed by AHCA to the First District

Court of Appeal.

On November 2, 2001, HHCI filed a Motion for Attorney Fees

in the Administrative Complaint cases. On November 8, 2001,

HHCI filed a Motion to Dismiss in DOAH Consolidated Case No. 01 -

4124. AHCA failed to respond to either motion. By Order to

Show Cause dated November 30, 2001, AHCA was directed to respond

to the motions. AHCA thereafter filed a Notice of Voluntary

Dismissal that failed to add ress the issues raised in the HHCI

Motion for Attorney Fees. A telephone conference between the

parties was convened, at which point it appeared that there was

confusion at AHCA regarding the applicability of the fee

decision in the rule challenge case to the instant fee case.

Based on the conference call discussion, AHCA was provided with

another opportunity to respond to the Motion for Attorney Fees.

On January 16, 2002, AHCA filed an Amended Notice of

Voluntary Dismissal and Response to Order to Sho w Cause that

included a memorandum related to the instant request for fees.

In the response, AHCA asserted that the matter of fees and costs

for both the rule challenge case and the Administrative

Complaint cases had been addressed at the hearing in DOAH Case

No. 01 - 4283F. On January 28, 2002, HHCI filed a response to the

AHCA memorandum.

It should be noted that the Administrative Complaint cases

were never consolidated with the rule challenge case.

Similarly, the requests for fees and costs were never

consolidated.

A second telephone conference ensued at which time it was

determined that the Administrative Complaint cases would be

closed and that HHCI would file a separate fee petition

addressing the fees and costs incurred in defending against the

Adm inistrative Complaints unrelated to those addressed in the

Final Order in DOAH Case No. 01 - 4283F.

On April 9, 2002, HHCI, a foreign limited partnership

operating in the State of Florida, canceled the registration of

HHCI Limited Partnership with the Flori da Department of State.

On May 13, 2002, HHCI filed a Petition for Award of

Attorney's Fees and Costs pursuant to Sections 120.569(2)(e) and

120.595(1), Florida Statutes.

A Notice of Hearing was entered scheduling the formal

hearing for July 24, 2002. At the request of the parties, the

hearing was subsequently rescheduled for September 24, 2002, and

then for October 17, 2002.

On September 13, 2002, AHCA filed a Motion for Summary

Final Order and Attorney's Fees on the grounds that by canceling

its reg istration in Florida HHCI no longer had standing to seek

an award for fees and costs. For the reasons set forth herein,

AHCA's Motion for Summary Final Order and Attorney's Fees is

denied.

At the hearing on October 17, 2002, HHCI presented the

testimony o f Al Clark, an expert in attorney's fees; Malcolm

Harkins, partner with the Proskauer Rose law firm in Washington,

D.C.; and Scott Griggs, HHCI's in - house general counsel. HHCI

Exhibits 2, 4 through 10, and 16 were admitted into evidence.

AHCA offered th e testimony of William McCort and had Exhibit 1

admitted into evidence.

The Transcript of the hearing was filed on October 22,

2002. Both parties filed Proposed Final Orders that were

considered in the preparation of this Final Order.

On November 6, 2002 , HHCI filed a Motion for Leave to File

Late - Filed Exhibit. AHCA filed a response in opposition to the

Motion. The Motion is granted and the exhibit, an invoice from

Al Clark, is referenced herein.

FINDINGS OF FACT

1. On October 3, 2001, AHCA served t hree Administrative

Complaints on HHCI, apparently intending to revoke HHCI's

licenses to operate nursing homes on the basis of a retroactive

application of Section 400.121(3)(d), Florida Statutes (2001).

The statute states in pertinent part:

(3) The age ncy shall revoke or deny a

nursing home license if the licensee or

controlling interest operates a facility in

this state that:

* * *

(d) Is cited for two class I deficiencies

arising from separate surveys or

investigations within a 30 - month period.

2. HHCI filed petitions challenging AHCA's allegations in

the Administrative Complaints.

3. On October 12, 2001, HHCI filed a challenge to the non -

rule policy of retroactive application (DOAH Case No. 01 - 3935RU)

and a hearing was scheduled for Octobe r 23, 2001.

4. The Petitions in the Administrative Complaint cases

were forwarded by AHCA to DOAH on October 19, 2001, and were

consolidated under DOAH Case No. 01 - 4124.

5. The Final Order in Case No. 01 - 3935 RU, declaring

AHCA's policy of retroactive a pplication invalid, was issued on

October 31, 2001.

6. HHCI filed a Motion for Award of Attorney's fees in

DOAH Case No. 01 - 4124 on November 2, 2001. That motion forms

the basis for the instant case.

7. At the time the Administrative Complaints were f iled,

the three HHCI facilities held standard licenses and were

apparently operating in compliance with applicable law, with no

unresolved survey violations pending.

8. The day after the Administrative Complaints were

served, AHCA issued a press release and scheduled a telephonic

"media call - in" to reply to questions from interested press

representatives. The result of the media attention was to cause

great concern to both HHCI and the residents of their facilities

as to the proposed closure of the facil ities.

9. AHCA distributed a letter to residents indicating that

unless HHCI challenged the action, the facility would be closed

in approximately 60 days. The AHCA letter advised residents

that if HHCI challenged the proposed action, the proposed actio n

"may be delayed." The AHCA letter did not indicate that any

resolution of the dispute other than facility closure was

possible.

10. The result of the attention and statements by AHCA's

representative was to cause great concern among residents and

their families as to what living arrangements would be available

for residents of the facilities.

11. AHCA also placed monitors in each facility to discuss

the pending action with residents and their families, as well as

to observe the facility operations. Th ere is no evidence that

the placement of monitors in the facilities offered any level of

comfort to residents or families. The monitors also apparently

began citing the facilities for alleged additional violations of

various regulations.

12. In respons e, HHCI officials immediately sought legal

counsel to address the situation. Counsel at the Washington,

D.C., law firm, Proskauer Rose, became involved in representing

HHCI. HHCI also retained Counsel in the Tallahassee office of

the Broad and Cassel law firm, with whom it had no prior

relationship.

13. HHCI directed its legal team to review all possible

options to resolving the matter expeditiously. Counsel

considered both federal and state court action and filed a

request for injunction in state cou rt.

14. HHCI also attempted to resolve the matter informally.

On October 8, 2001, HHCI obtained an opinion from the Joint

Administrative Procedures Committee (JAPC), a standing committee

of the Florida Legislature, which concluded that "a strong legal

ar gument" could be made that the retroactive application of the

statute was improper. There is no evidence that AHCA considered

the JAPC opinion.

15. In any event, because informal attempts to resolve the

matter were unsuccessful, HHCI legal counsel bega n an intensive

effort to defend the company against the AHCA action.

16. The Final Order in Case No. 01 - 3935RU held that there

was an absence of legal authority to apply the new law

retroactively. There was no appeal of the Final Order. After

the Fina l Order was issued, AHCA abandoned the Administrative

Complaints that sought to revoke HHCI's licenses and close the

facilities.

17. In this proceeding, HHCI seeks fees it incurred for

the Broad and Cassel and the Proskauer Rose law firms and for

presen tation of the testimony of Al Clark at the fee hearing.

18. HHCI presented nine invoices from Broad and Cassel

that were admitted as HHCI Exhibit 1. The invoices submitted in

this case do not duplicate time that was invoiced as part of the

rule challenge - related fee case.

19. Invoice #469914 dated November 1, 2001, is for a total

of $23,835.87, including fees of $23,565 and costs of $270.87.

The majority of the work in these cases was performed in

October. The invoice indicates time spent considering s everal

theories of defense to the complaints.

20. Invoice #474211 dated December 1, 2001, is for a total

of $2,282.02, including fees of $1,981.50 and costs of $300.52.

21. Invoice #479185 dated January 2, 2002, is for a total

of $257.59, including fee s of $245 and costs of $12.59.

22. Invoice #491866 dated February 9, 2002, is for a total

of $5,463.05, including fees of $5,116.50 and costs of $346.55.

23. Invoice #496833 dated April 3, 2002, is for a total of

$161.74, including fees of $147 and costs of $14.74.

24. Invoice #505207 dated June 7, 2002, is for a total of

$738.68, including fees of $735 and costs of $3.68.

25. Invoice #507485 dated July 2, 2002, is for a total of

$296.17, including fees of $294 and costs of $2.17.

26. Invoice #515997 d ated October 2, 2002, is for a total

of $1,625.93, including fees of $1586 and costs of $39.93.

27. Invoice #516952 dated October 16, 2002, is for a total

of $2,903.35, including fees of $2878 and costs of $25.35.

28. HHCI presented the testimony of Al C lark, who was

accepted as an expert on the issue of attorney fees. Mr. Clark

testified as to the reasonableness of the fees and costs charged

to HHCI by the Broad and Cassel law firm. Mr. Clark's testimony

was not contradicted and is credited.

29. The t ime and labor expended by employees of the Broad

and Cassel law firm were reasonable in light of the legal issues

presented by the administrative actions proposed by AHCA. The

presumed goal of AHCA's action was to revoke the licensure of

HHCI's three nurs ing homes. Broad and Cassel provided the

substantial skill and expertise required to supply the necessary

legal services.

30. Broad and Cassel billed HHCI at an hourly rate. The

hourly rates charged by Broad and Cassel personnel are

reasonable. The r ates ranged from $245 per hour for lead

counsel to $90 per hour for support counsel.

31. There was no prior business relationship between Broad

and Cassel and HHCI. Broad and Cassel counsel has significant

experience and skill in health care law and pro vided their

services efficiently throughout the dispute.

32. Because the proposed sanction was severe, and because

the agency publicized its legal action, HHCI required an

immediate legal response resulting in an intense initial amount

of work by Broad an d Cassel.

33. Broad and Cassel personnel represented HHCI legal

interests throughout the administrative proceedings and

prevailed in defending against the proposed administrative

action.

34. Subsequent to the hearing, HHCI submitted Mr. Clark's

invoic e for $1,012.50. Mr. Clark's invoice reflects a

reasonable effort expended in addressing the costs and fees at

issue in this case.

35. At the hearing, Mr. Clark further testified that an

amount up to $10,000 would be possible for the resolution of

this f ee case. At this time, none of this expense has been

incurred and is not properly awarded.

36. Based on the foregoing, HHCI has satisfied the factors

set forth in Florida Bar Rule 4 - 1.5(b) related to awards of fees

and costs in this case, and is entitled to an award of fees and

costs for the Broad and Cassel billing and for Al Clark's

invoice.

37. Mr. Clark was not asked for, and did not offer, an

opinion about the reasonableness of the Proskauer Rose fees.

38. There is no credible evidence supporting an award of

fees for work performed by the Proskauer Rose firm. Based on

the testimony presented during the hearing, the evidence fails

to establish that the charges by the Proskauer Rose firm as set

forth on the exhibit are reasonable.

39. Billing reco rds admitted into evidence as HHCI

Exhibit 3 contain references to regulatory matters not directly

at issue in the proceedings giving rise to this request for

fees. Such additional matters include nursing home surveys

performed in October 2001, preparatio ns for informal dispute

resolution (IDR) meeting related to survey issues, and

regulatory matters occurring in other states.

40. The IDR preparations, although apparently prompted by

alleged problems identified by the monitors, were not at issue

in the Administrative Complaints that form the basis for this

fee request. Although HHCI asserts that an Administrative Law

Judge, hearing the Administrative Complaints seeking license

revocation, could have considered the alleged problems, such

allegations woul d have required amendment of the pending

Administrative Complaints. More likely, the allegations would

have been the subject of new Administrative Complaints that

would have been litigated separately, and, as such, costs

related to IDR preparation are not properly awarded in the

instant case.

41. Further, the Proskauer Rose invoices indicate that

hours billed on one invoice in "File #84028.0014" for October 12

(description beginning with "review faxed 256") and October 22

(description beginning with "Meet ing with S. Davis and

C. Schessler re preparation for IDR") were also billed on

another invoice in "File #84028.0015." Duplicate billings would

not support an award of attorney fees.

AHCA'S MOTION FOR SUMMARY JUDGMENT

42. On April 9, 2002, HHCI, a for eign limited partnership

operating in the State of Florida, canceled the registration of

HHCI Limited Partnership with the Florida Department of State.

43. HHCI Limited Partnership continues to operate in other

states and is registered in Massachusetts .

CONCLUSIONS OF LAW

44. DOAH has jurisdiction over the parties and the subject

matter of the proceeding. Section 120.569(2)(e), Florida

Statutes.

45. Section 120.569(2)(e), Florida Statutes, provides as

follows:

All pleadings, motions, or other papers

filed in the proceeding must be signed by

the party, the party's attorney, or the

party's qualified representative. The

signature constitutes a certificate that the

person has read the pleading, motion, or

other paper and that, based upon reasonable

inqu iry, it is not interposed for any

improper purposes, such as to harass or to

cause unnecessary delay, or for frivolous

purpose or needless increase in the cost of

litigation . If a pleading, motion, or other

paper is signed in violation of these

requiremen ts, the presiding officer shall

impose upon the person who signed it, the

represented party, or both, an appropriate

sanction, which may include an order to pay

the other party or parties the amount of

reasonable expenses incurred because of the

filing of the pleading, motion, or other

paper, including a reasonable attorney's

fee. (emphasis supplied).

46. HHCI asserts that AHCA filed the Administrative

Complaints for an improper purpose, specifically to counter

negative attention AHCA had allegedly recei ved for nursing home

regulatory problems, and to generate publicity for increased

vigilance on the agency's part. HHCI asserts that AHCA then

delayed settlement of the dispute, resulting in a "needless

increase in the cost of litigation."

47. Whether AHC A counsel knew that retroactive application

of the law was inappropriate, or whether AHCA chose to proceed

with uncertain authority in prosecuting the cases, is not

relevant. A court should not delve into an attorney's or

party's subjective intent or into a good faith - bad faith

analysis. Instead, if a reasonably clear legal justification

can be shown for the filing of an Administrative Complaint,

improper purpose cannot be found and sanctions are

inappropriate. Mercedes Lighting and Elec. Supply, Inc. v.

Dept. of General Services , 560 So. 2d 272, 278.

48. Otherwise stated, the central issue in considering

whether the sanction of attorney's fees should result is whether

there was a clear legal justification for prosecuting the case.

In this case, there w as not. AHCA acted without any reasonable

basis in law in attempting to apply the newly enacted statute

retroactively. There is no need to review the issue of

retroactive application here. The Final Order in the rule case

clearly states the applicable l aw, and there was no appeal of

the order.

49. Even if under some mistaken legal theory AHCA believed

that it could implement the statute retroactively, certainly as

of October 5, 2001, (two days after the Administrative

Complaints were filed) AHCA was o n notice, based on the JAPC

opinion, that retroactive application of the statute was

improper. The JAPC opinion clearly references the well -

established proposition that "absent a clear legislative

expression requiring retroactive application, a law is pre sumed

to operate prospectively, meaning that it will apply only to

conduct occurring after the statute becomes effective" (citing

Middlebrooks v. Department of State, Division of Licensing , 565

So. 2d 727 (Fla. 1st DCA 1990). There is no evidence of recor d

as to whether or not AHCA considered the JAPC opinion at any

point in the process.

50. AHCA's attempted retroactive application of the

regulatory statute was intended to revoke the licensure of three

nursing homes that were operating under standard li censes at the

time the complaints were filed. AHCA had no authority to

enforce the newly enacted statute retroactively. AHCA's attempt

to enforce the statute resulted in needless litigation. HHCI's

defense against the complaints incurred substantial exp enses for

which AHCA should be required to reimburse to the extent that

such expenses are determined to be reasonable based upon the

evidence presented during the hearing on the instant case.

51. HHCI also asserts that AHCA's action in this matter

was f or an improper purpose (specifically publicity) and cites

to AHCA's issuance of a press release and subsequent press

availability as proof of the improper purpose. The evidence

fails to support the assertion. It is not uncommon nor is it

inappropriate fo r a government agency to issue a press release

in order to publicize an agency's regulatory action. The fact

that AHCA did so in this case, does not establish that it acted

improperly.

52. Although HHCI cited Section 120.595(1)(b), Florida

Statutes, as a basis for this claim, the section is not

applicable. Section 120.595(1)(b), Florida Statutes, provides

as follows:

(b) The final order in a proceeding

pursuant to s. 120.57(1) shall award

reasonable costs and a reasonable attorney's

fee to the prevailin g party only where the

nonprevailing adverse party has been

determined by the administrative law judge

to have participated in the proceeding for

an improper purpose.

53. In this case, AHCA does not meet the definition of a

"nonprevailing adverse party, " as defined in Subsection

120.595(1)(e)3., Florida Statutes, as one "that has failed to

have substantially changed the outcome of the proposed or final

agency action . . . ."

AHCA'S MOTION FOR SU MMARY FINAL ORDER

54. On September 13, 2002, AHCA moved for summary Final

Order in this case, citing Section 620.159(2), Florida Statutes,

which provides as follows:

Upon dissolution of a limited partnership

and until the filing of a certificate of

cancellation, persons winding up the limited

partnership's affairs may, in the name of,

and for and on behalf of, the limited

partnership, prosecute and defend suits,

whether civil, criminal, or administrative,

gradually settle and close the limited

partnership's business, dispose of and

convey the limited partnership's property,

discharge the limited partnership's

liabilities, and distribute to the partners

any remaining assets of the limited

partnership, all without affecting the

liability of limited partners.

55. On April 9, 2002, HHCI Limited Partnership cancelled

its Florida registration with the Florida Department of State.

There is no evidence that HHCI Limited Partnership has been

dissolved. The evidence establishes that the HHCI Limited

Partnership continues to exist but is not doing business in

Florida.

56 . Section 620.179(3), Florida Statutes, provides that

the "failure of a foreign limited partnership to register in

this state, or the failure of a domestic or foreign limited

partnership to continue in effect its authority to transact

business in this sta te, does not . . . prevent the partnership

from defending any action, suit, or proceeding in any court of

this state."

57. At the time of the hearing, HHCI was continuing to

defend the appeal of the fee award made in the rule challenge,

currently pending at the First District Court of Appeal.

58. HHCI initiated this request for fees and costs at the

commencement of the Administrative Complaint process. The fee

issue would have been resolved long ago but for the fact that

AHCA was provided with repeated o pportunities to address the fee

issue. AHCA asserts that the Final Order entered in the rule

challenge fee case included the fee request in the

Administrative Complaint cases. The assertion is not

persuasive. The cases were not consolidated, and there i s no

evidence that the fees sought in the instant hearing duplicate

fees awarded in the rule challenge fee case.

59. HHCI's request for fees was part of its defense in the

underlying cases. HHCI seeks sanctions because it was required

to defend against Administrative Complaints filed against HHCI

without a reasonable supporting basis in law or fact. The

Motion for Summary Recommended Order is denied.

FINAL ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, AHCA is hereby directed to pay HHCI the amount of

$38,576.90 (including Broad and Cassel invoices totaling

$37,564.40, and the Al Clark invoice of $1,012.50) as reasonable

attorney's fees and costs under Section 120.569(2)(e), Florida

Statutes.

DONE AND ORDERED this 21st day of Nov ember, 2002, in

Tallahassee, Leon County, Florida.

___________________________________

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 21st day of November, 2002.

COPIES FURNISHED :

Christine T. Messana, Esquire

Richard J. Saliba, Esquire

Agency fo r Health Care Administration

2727 Mahan Drive, Mail Stop No. 3

Tallahassee, Florida 32308 - 5403

Donna H. Stinson, Esquire

Broad & Cassel

215 South Monroe Street, Suite 400

Post Office Box 11300

Tallahassee, Florida 32302

Lealand McCharen, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive

Mail Stop No. 3

Tallahassee, Florida 32308 - 5403

Valda Clark Christian, General Counsel

Agency for Health Care Administration

2727 Mahan Drive

Fort Knox Building, Suite 3431

Tallahassee, Florida 323 08

Rhonda M Medows, M.D., Secretary

Agency for Health Care Administration

2727 Mahan Drive

Fort Knox Building, Suite 3116

Tallahassee, Florida 32308

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 Adminis trative 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.