03-002806F Global Health Information/Medical Research Institute, Inc. vs. Department Of Health Status: Closed DOAH Final Order on Monday, January 3, 2005.

Summary: Respondent was substantially justified in bringing the underlying proceeding where Petitioner and related companies appeared to have common ownership and appeared to have falsely advertised and made false claims about unapproved drugs.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GLOBAL HEALTH )

INFORMATION/MEDICAL RESEARCH )

INSTITUTE, INC., )

)

Petitioner, )

)

vs. ) Case No. 0 3 - 2806F

)

DEPARTMENT OF HEALTH, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case

in Tampa, Florida, on August 19, 2004, before Carolyn S.

Holifield, a duly - designated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

Fo r Petitioner: Brandon L. Kolb, Esquire

Discovery Tours

Legal Department

35202 State Road 54

Zephyrhills, Florida 33541

For Respondent: Robert Daniti, Esquire

Department of Health

4052 Bald Cypress Way, BIN A02

Tallahassee, Florida 32399 - 1703

STATEMENT OF THE ISSUE

The issue is whether Petitioner is entitled to an award of

attorney's fees and costs pursuant to Section 57.111, Florida

Statute (2003); and, if so, what is the amount of attorney's

fees and costs that are recoverable by Petitioner.

PRELIMINARY STATEMENT

On July 28, 2003, Petitioner, Global Health Information

Information/Medical Research, Inc. ("Global Health"), filed a

Petition for Aw ard of Attorney Fees and Costs ("Petition for

Attorney's Fees") pursuant to Section 57.111, Florida Statutes

(2003), and the Affidavit of James T. Kimball in Support of

Global Health's Petition for Attorney Fees. The Petition for

Attorney Fees requests at torney's fees and costs incurred by

Global Health in litigating Department of Health v. Discovery

Experimental, et al. , Case No. 93 - 6184 (DOAH April 18, 2003),

which consolidated four cases, DOAH Case Nos. 93 - 6184, 95 - 2255,

97 - 3836, and 98 - 4364. The Admin istrative Complaint filed by the

Department of Health ("Department") in DOAH Case No. 97 - 3836

("1997 Administrative Complaint" or "underlying proceeding")

alleged that Global Health unlawfully promoted, advertised, and

made medical claims for drug products which are not FDA

approved, and are misbranded and adulterated. The undersigned

issued a Recommended Order in the underlying proceeding on

April 18, 2003.

The Recommended Order recommended that the Department

dismiss the Administrative Complaint against Global Health. The

Department's Final Order executed May 23, 2003, approved,

adopted, and incorporated by reference the Recommended Order in

the underlying proceeding.

The Department denied that Global Health was the prevailing

party in the underlyi ng case and that Global Health is entitled

to attorney's fees and costs. The Department asserted that it

was substantially justified in filing the administrative action

in the underlying proceeding.

By Amended Notice of Hearing issued September 3, 200 3, the

hearing in the matter was set for October 24, 2003. Prior to

that date, the parties requested and were granted several

continuances for good cause shown. Thereafter, the final

hearing was rescheduled and held on August 19, 2004.

On March 10, 2004, this case was consolidated with

Discovery Tour Wholesalers, Inc. v. Department of Health , DOAH

Case No. 03 - 2754, and Josephine Kimball v. Department of Health ,

DOAH Case No. 03 - 2807, solely for the purpose of the final

hearing because the three cases involved identical witnesses and

documentary evidence. However, the parties and the undersigned

agreed that a separate final order would be issued in each case.

Prior to the evidentiary part of the hearing, the

undersigned denied the Department's Mo tion in Limine and/or the

Department's Motion for Partial Judgment as to the maximum

amount of attorney's fees that can be awarded to Petitioner,

Discovery Tour Wholesaler, Inc., and Petitioner, Global Health.

At hearing, Petitioner presented the test imony of five

witnesses: Josephine Kimball, Toni Kimball; Joy Young; Rolando

Santiago, Esquire; and Jon Pellet, Esquire. The Department

stipulated that Mr. Pellett was an expert witness with regard to

this type of proceeding. Petitioner offered and had ten

exhibits received into evidence. The Department presented the

testimony of two witnesses: Jerry Hill, R.Ph., Bureau Chief of

Statewide Pharmaceutical Services; and Deborah Orr, a former

drug agent with the Department. The Department offered and had

12 exhibits received into evidence. The parties had five joint

exhibits received into evidence. 1/

A Transcript of the proceeding was filed on September 3,

2004. At the conclusion of the hearing, the time for filing

proposed final orders was set for ten days from the filing of

the Transcript. Prior to that date, upon motion filed by the

Department, the time for filing proposed final orders was

extended until September 23, 2004. On September 22, 2004, the

parties filed an agreed motion to extend the time for filing

proposed final orders. The agreed motion was granted and

extended the time for filing proposed final orders until

October 8, 2004. Petitioner requested an additional extension,

which was granted.

Both parties timely filed Proposed Recomme nded Orders under

the extended time frames, which have been considered in

preparation of this Final Order.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at

hearing and on the entire record of this proceeding, the

following Findings of Fact are made.

1. The Department, through its Bureau of Statewide

Pharmaceutical Services (formerly the Bureau of Pharmacy

Services), is and was at all times relevant to this proceeding,

the state agency responsible for administering and enforcing the

Florida Drug and Cosmetic Act, Chapter 499, Florida Statutes

(1997), which includes the regulation of the manufacture,

promotion, and distribution of prescription drugs.

2. In late 1990, the Department began investigating the

unlawful advertising, manufa cture, and distribution of

prescription drugs that are not approved in commerce by the

United States Department of Health and Human Services, Food and

Drug Administration (FDA), of an establishment located at 29949

State Road 54 West, Wesley Chapel, Florid a. The establishment

was the primary business address of several closely held

corporations owned and operated by James T. Kimball, and his

wife, Josephine Kimball.

3. The Department initiated an Administrative Complaint in

August 1993 (1993 Administrati ve Complaint), while in the middle

of its investigation and after participating in a federal and

state force of agencies that executed a search and seizure of

the Kimballs' business establishment and their home located in

Wesley Chapel, as well as other lo cations. The search and

seizure took place on May 12, 1993, pursuant to federal

warrants. The Kimballs' business establishment was located at

29949 State Road 54 West, in Wesley Chapel, Florida.

4. The 1993 Administrative Complaint was issued to

Discove ry Experimental & Development, Inc. ("DEDI"), and related

to that company's alleged sale of drugs that were not approved

by the FDA. DEDI was located at 29949 State Road 54 West,

Wesley Chapel, Florida. After the 1993 Administrative Complaint

was filed, the Department continued to investigate the

activities of DEDI.

5. Deborah Orr (Agent Orr) began working for the

Department as a drug agent in or about 1993 and was assigned to

investigate the underlying case until the case culminated.

6. During the i nvestigation, Agent Orr and others in the

Department reviewed documents and other evidence seized during

the search of the business establishment and the home of the

Kimballs that tied both Mr. Kimball and Mrs. Kimball to several

corporations that appeared to be connected to the manufacture

and sale of certain unapproved drugs. Among the documents

seized, pursuant to the 1993 warrant, was Global Health's

letterhead.

7. During the investigation and prior to 1997, Agent Orr

visited the Global Health office . Global Health had one of the

smaller offices, about 8x8 or 9x9, at "HQ," 15310 Amberly Drive,

Suite 250, Tampa Palms in Tampa, Florida. In the Global Health

offices were pamphlets put out by Global Health called "Silver

Solutions" that promoted the col loidal silver products of DEDI,

and later ASTAK, Inc. (ASTAK), and made medicinal claims despite

the Department's previous warnings to Mr. Kimball and

Mrs. Kimball that this was unlawful. It appeared that Global

Health distributed these pamphlets.

8. Amo ng the documents found and seized from the Kimballs'

home, pursuant to the 1993 warrant and reviewed by Agent Orr,

was the financial statement of "James and Josephine Kimball,"

dated April 14, 1992. According to that document, "James and

Josephine Kimball " were 90 - percent owners of DEDI, which

"develops pharmaceuticals and chemicals for manufacturing" and

had an assessed value of $1,000,000; "James and Josephine

Kimball" were 90 - percent owners of ASTAK, a company that

"manufactures custom order vitamins"; James Kimball was a 100 -

percent owner of Discovery Experimental and Development, Mexico

N.A. (DEDI of Mexico), a company that "manufacture[s]

pharmaceuticals" and ships to 12 countries; and "James and

Josephine Kimball" were 83 - percent owners of Discovery Tour

Wholesalers' Inc. (Tours), which owned the real property located

at 29949 State Road 54 West, Wesley Chapel, Florida.

9. The Department's investigation indicated that several

companies controlled by the Kimballs had separate and distinct

functions re lated to the unlawful drug enterprise. For example,

it appeared that one company manufactured the unlawful drugs,

another took and filled orders from customers for the unlawful

drugs, and another put out promotional information and

literature about the un lawful drugs.

10. During the investigation, the Department determined

that many of the companies controlled by Mr. and Mrs. Kimball

and involved in unlawful drug distribution were located in the

building owned by Tours and located at 29949 State Road 54 We st,

Wesley Chapel, Florida.

11. Prior to issuance of the 1997 Administrative Complaint

in the underlying proceeding, Agent Orr wrote a report of her

findings based on her multi - year investigation and sent them to

her supervisor, who forwarded the report to Jerry Hill, R.Ph.,

Bureau Chief, Statewide Pharmaceutical Services of the

Department. Mr. Hill reviewed the report that was prepared by

Agent Orr and information and evidence obtained during the

investigation. He also talked to some of the Department ag ents

and/or investigators who participated in the investigation at

various times during the years the investigation was on - going.

12. Based on his review of Agent Orr's report and related

information and evidence, Mr. Hill believed there were several

compa nies involved in promoting and/or advertising,

manufacturing, and distributing prescription drugs that were not

approved by the FDA. The specific unapproved drugs were

selegiline citrate (deprenyl) and some silvicidal products, some

of which had been foun d during inspections of the premises at

29949 State Road 54 West, Wesley Chapel, Florida. Although

Mr. Hill believed that some of the companies were more involved

in the operation than others, he believed that all of the

principals had some involvement in the illegal activity.

13. Based on the information Mr. Hill obtained prior to

issuing the 1997 Administrative Complaint, he believed that

Global Health had falsely advertised and made false claims about

drugs containing silver that were manufactured by R espondents

DEDI and ASTAK, non - prevailing parties in the underlying

proceeding. In addition, Department drug agents had obtained

samples of the unlawful silver drugs that appeared related to

DEDI and ASTAK that made false claims on their labels, similar

t o the false and misleading advertisement of these drugs by

Global Health. Mr. Hill believed that because of the common

ownership of DEDI and ASTAK, the companies that he believed

manufactured, labeled, and sold the unlawful silver drugs, and

Global Health , the apparent advertising arm of DEDI and ASTAK,

the advertisements of Global Health constituted "labeling" and,

thus, false or misleading advertisement of prescription drugs in

violation of Chapter 499, Florida Statutes (1997), specifically

Section 499.0 054, Florida Statutes (1997) .

14. Based on the information and evidence Mr. Hill had

received, he believed that the corporations that were engaging

in these activities involved two principal natural persons,

Mr. and Mrs. Kimball.

15. Mr. Hill believed that he had sufficient evidence to

tie DEDI, DEDI of Mexico, ASTAK, TOURS, and Global Health

together. For example, the information Mr. Hill reviewed

indicated that, except for Global, these entities were at the

same address, 29949 State Road 54 West, in Wesley Chapel,

Florida, and also had common ownership. Mr. Hill was concerned

that if the Department did not tie the companies together and

prosecute all the entities that were involved in the operation,

the illegal activity would continue through some ot her company,

and the unapproved drugs would get into commerce.

16. Mr. Hill believed that the situation described in

paragraph 15 could happen based on another situation that

occurred in or about 1991, when the Department initiated and

settled an enforceme nt action against Discovery Distributing,

Inc. (Discovery Distributing), located at 29949 State Road 54

West, in Wesley Chapel, Florida, and its president, Mr. Kimball.

The enforcement action related to Discovery Distributing's

promotion of an unlawful pro duct called Kimballac. Pursuant to

the settlement in that aforementioned action, Mr. Kimball agreed

not to manufacture or sell drugs that had not been approved by

FDA. Yet, Mr. Hill learned that soon after the settlement was

signed, the unlawful activiti es resumed with the same type of

products being sold to the citizens of Florida.

17. After careful consideration of all the information and

evidence provided to him by Department investigators, agents,

and other Department officials familiar with and in volved in the

investigation, Mr. Hill concluded that Global Health had

violated provisions of Chapter 499, Florida Statutes (1997), by

making false and misleading advertisements about drugs that were

not approved by FDA. Having made that determination on or about

June 24, 1997, Mr. Hill issued the 1997 Administrative Complaint

in the underlying proceeding, which was later assigned DOAH Case

No. 97 - 3836.

18. Pursuant to a Delegation of Authority dated

February 19, 1997, Mr. Hill was authorized to initiate a nd

pursue to conclusion any legal or administrative action

authorized by Chapter 499, Florida Statutes (1997).

19. In the underlying administrative proceeding, after

taking and considering testimony and documentary evidence, the

Administrative Law Judge is sued a Recommended Order finding that

the Department failed to establish by clear and convincing

evidence that Global Health violated the provisions of Chapter

499, Florida Statutes (1997), as alleged by the Department.

That Recommended Order was adopted in the Department's Final

Order.

20. At all times relevant to this proceeding, Global

Health was a Florida corporation with its primary office in

Florida and had less than 25 employees and a net worth of less

than $2,000,000.

21. Global Health was r epresented by Elliot Dunn, Esquire,

in the pre - hearing phase of the underlying proceeding and the

first day of the 23 - day final hearing. Mr. Dunn withdrew from

the case after Mr. Kimball "fired" him during the proceeding.

22. Mr. Dunn, Esquire, did not t estify at this proceeding

and at no time records related to his representation of Global

Health or any of the other Petitioners in the underlying

proceeding were available for review, inspection, or

consideration.

23. Global Health never paid Mr. Dunn for the legal

services that he provided. Moreover, there was never a contract

between Global Health and Mr. Dunn that defined the terms and

conditions of Mr. Dunn's legal representation on behalf of

Global Health.

24. Petitioner's expert witness opined that a reasonable

hourly rate for attorneys representing each of the Petitioners,

including Global Health, was $175 to $350. The expert did not

form an opinion as to the total number of hours reasonably spent

by Mr. Dunn representing Global Health in the unde rlying

proceeding. Rather, the expert testified that he utilized Rules

Regulating Florida Bar 4 - 1.5, which deals with the

reasonableness of fees and concluded that based on the factors

in that rule, reasonable attorney's fees incurred by Global

Health in the defense of the underlying case is $12,000 to

$17,000, assuming the lower rate of $175.

25. In light of the findings and conclusions reached in

this Final Order, no findings are made or necessary regarding

issues related to the reasonableness of the att orney's fees, the

quality of the evidence presented on that issue, or any other

issues related to attorney's fees.

CONCLUSIONS OF LAW

26. The Division of Administrative Hearings has

jurisdiction over the subject matter and parties to this

proceeding. §§ 57.111 and 120.57, Fla. Stat. (2004).

27. In proceedings to establish entitlement to an award of

attorney's fees and costs pursuant to Section 57.111, Florida

Statutes (2003), the initial burden of proof is on the party

requesting the award to establish b y a preponderance of the

evidence that it prevailed in the underlying action and that it

was a small business party at the time the action was initiated.

28. Petitioner proved that it is a small business party

within the meaning of Subsection 57.111(3)(d )1.b., Florida

Statutes (2003). Furthermore, Petitioner established that the

underlying action was initiated by the Agency. Therefore,

Petitioner has met its burden of establishing that it is a

prevailing small business party.

29. Because Petitioner met its burden, the burden shifts

to the Department to demonstrate that its actions were

substantially justified or that special circumstances exist,

which would make an award of attorney's fees and costs unjust.

Subsection 57.111(4)(a), Florida Statutes (200 3), provides that

unless the actions of the Respondent were substantially

justified or there are special circumstances that would make an

award unjust, an award of fees and costs shall be made to

Petitioner.

30. In this case, the Department was substantial ly

justified in initiating the underlying administrative action

against Global Health. The evidence established that at the

time the Department initiated the underlying administrative

action against Global Health, the Department had a reasonable

basis in law and fact to believe that Global Health violated

provisions of Chapter 499, Florida Statutes (1997).

31. The purpose of Section 57.111, Florida Statutes

(2003), is to diminish the deterrent effect of defending against

unreasonable government action bec ause of the expense of civil

actions and administrative proceedings. The Department

satisfied its burden of showing that the governmental action

against Global Health was not unreasonable at the time the

Department initiated the action.

32. The fact that Respondent failed to prove the

allegations in the Administrative Complaint by clear and

convincing evidence does not raise a presumption that the

Department was not substantially justified in initiating the

administrative action against Global Health.

ORD ER

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

ORDERED that Petitioner, Global Health Information/Medical

Research Institute, Inc.'s, Petition for Attorney's Fees be

DISMISSED .

DONE AND ORDERED this 3rd day of January, 20 05, in

Tallahassee, Leon County, Florida.

S

CAROLYN S. HOLIFIELD

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SU NCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 3rd day of January, 2005.

ENDNOTE

1/ The record in this case will be retained with the Final Order

in DOAH Case No. 03 - 28 07F.

COPIES FURNISHED :

Robert Daniti, Esquire

Department of Health

4052 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1703

Brandon L. Kolb, Esquire

Discovery Tours, Legal Department

35202 State Road 54

Zephyrhills, Florida 33541

R.S. Power, A gency Clerk

Department of Health

4052 Bald Cypress Way, BIN A02

Tallahassee, Florida 32399 - 1701

Quincy Page, Acting General Counsel

Department of Health

4052 Bald Cypress Way, BIN A02

Tallahassee, Florida 32399 - 1701

NOTICE OF RIGHT TO JUDICIAL REVIE W

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 th e original Notice of Appeal with the agency 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.