05-004037 Vincent Robert Fugett, Sr. vs. Department Of Financial Services Status: Closed Recommended Order on Friday, June 29, 2007.

Summary: Respondent has no authority to deny an application after the 90-day statutory time limit or based on a plea to a crime not punishable by imprisonment as a felony; waiting periods are not grounds for an initial denial. Petitioner is fit to be licensed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VINCENT ROBERT FUGETT, SR. , )

)

Petitioner , )

)

vs. ) Case No. 05 - 4037

)

DEPARTMENT OF FINANCIAL )

SERVICES , )

)

Respondent . )

)

RECOMMENDED ORDE R ON R EMAND

Administrative Law Judge (ALJ) Da niel Manry conducted the

hearing on remand of this proceeding on behalf of the Division

of Administrative Hearings (DOAH), on April 25, 2007, in

St. Petersburg, Florida .

APPEARANCES

For Petitioner: Vincent Ro bert Fugett, Sr. , pro se

166 First Avenue, North

St. Petersburg , Florida 33704

For Respondent: Angelique Knox, Esquire

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

STATEMENT OF THE ISSUE

The issue is whether Petitioner is license d as a life

insurance agent pursuant to a default license approved by

operation of Su bsection 120.60( 1), Florida Statutes (2005). 1

PRELIMINARY STATEMENT

The proce dural history of this case is discussed in greate r

detail in the Findings of Fact . In summary, the First District

Court of Appeal quashed the Amended R ecommended Order entered in

the original proceeding on June 22, 2006, and remanded the case

to the ALJ for the purpose of giving the parties "an opportunity

to present evidence and/or argument" concern ing the " default

license provision of Subsection 120.60(1) . "

At the hearing on remand , Petitioner did not test ify and

did not submit any exhibits for admission into evidence.

Respondent called one witness and submitted nine exhi bits .

The identity of the witnesses and exhibit s and related

rulings are reported in the one - volume Transcript of the hearing

filed on May 3 , 2007 . Respondent filed its Proposed Recommended

Order (PRO ) on May 15 , 2 007 . Petitioner did not file a PRO.

FINDINGS OF FACT

1. The original proceeding began o n May 2, 2005, when

Petitioner filed an application with Respondent to be licensed

as a "resident life including variable annuity personal lines

insurance agent." Respondent issued a Notice of Denial on

September 2 2 , 2005, and Petitioner requested an administrative

hearing pursuant to Subsection 120.57(1).

2. Respondent referred the matte r to DOAH to conduct the

hearing . T he ALJ conducted the hearing on April 25, 2006, and

issued an Amended Recommended Order on June 22, 2006 (the

Amended Recommended Order) .

3. The Amended Recommended Order, in relevant part,

concluded that the license application "is considered approved "

pursuant to Subsection 120.60(1) because Respondent did not deny

the application within 90 day s of receiving it and did not

establish a record predicate for agency inaction within the

statutory time limit . The Amended Recommended Order concluded

that a default license was approved by operation of the statute

on August 1, 2005, approximately 91 days after the agency

received t he application.

4. Respondent filed a Petition for Writ of Certiorari to

Review Non - Final Act ion By an Administrative Law Judge (Petition

for Cert) with the First District Court of Appeal. The P etition

for Cert is dated July 10 , 2006.

5. On December 27, 2006, the court quashed the Amended

Recommended Order and remanded the case to the ALJ for further

proceedings consistent with the court's order . The order limits

the remand proceeding to " evidence and/or arg ument" concerning

the " default licensing provision of Subsection 120.60(1) . "

State of Florida, Department of Financial Services v. Vincen t

Robert Fugett, Sr. , 946 So. 2d 80 (Fla. 1st DCA 2006).

6 . The findings in th is Recommended Order On R emand are

limite d to those pertaining to the default licensing provision

of Subsection 120.60(1). Except a s modified herein, t he

Findings of Fact in t he Amended Recommended Order are

inco rporated by refe rence .

7 . Respondent received the initial license application on

May 2, 2005, but the application was not complete until

August 23, 2005. Respondent issued a written Notice of Denial

of the applicat ion on September 22, 2005, within 9 0 days of

receiving a complete application.

8 . Respondent issued a written notice of deficiency when

Respondent received the initial application o n May 2, 2005 .

That notice of deficiency is identified in the record as an

"au tomatic deficiency statement . "

9 . Petitioner submitted three separate supplements to the

initial application . Respondent issued a timely , written

deficiency n otice concerning each supplement on May 18, July 25,

and August 11, 2005.

10 . A final su pplement completed the application on

August 23, 2005. Respondent denied the application by written

Notic e of Denial dated September 22 , 2005 , les s than 90 days

after receiving the completed application .

CONCLUSIONS OF LAW

11 . The Conclusions of Law in the Amended Recommended

Order are incorporated by this reference except as modified

herein. M odifications are limited to those required to examine

the agency's argument concerning the proper interpretation of

the default license provision in Subsection 12 0.60(1).

12 . The examination of the agency's interpretation of

Subsection 120.60(1) is not limited to a determination of the

good faith of agency policy choices . The ALJ is char ged with

the additional duty of critiquing agency policy. 2

1 3 . The add itional duty of an ALJ was recognized by the

First District Court of Appeal more than 30 years ago in

McDonald v. Department of Banking and Finance , 346 So. 2d 569,

581 - 583 (Fla. 1st DCA 1977). As t he court explained :

While the Florida APA . . . requires

rulemaking for policy statements of general

applicability (emphasis not supplied), it

also recognizes the . . . desirability of

refining incipient agency policy through

adjudication of individual cases. . . .

* * *

[The APA] recognizes there may be

"officially stated agency policy" otherwise

than in "an agency rule"; and, since all

agency action tends under the APA to become

either a rule or an order, such other

"officially stated agency policy" is

necessarily recorded in agency orders. . . .

The APA's provision for agency policymaking

by adjudication has significant effect on

Section 120.57(1) proceedings, such as those

before us now, in which a party's

substantial interests are determined and

there are disputed issues of material fact.

Because the agency's final order in such

proceedings must explicate nonrule policy,

the . . . recommended order must do the

same. . . .

It follows that both the agency's final

order and the . . . recommended order must

in all respects - in dealing with emerging

a gency policy as well as in finding the

facts - have a predicate in the record

. . . . (emphasis supplied)

* * *

"The exposure of an official's decisional

referents to the critical scrutiny of others

may disclose the inadequacy of those

referents and create pressures to bring

about their change. This type of constraint

upon agency action will not tend to be

limited - as is judicial review - to

overseeing the good faith of agency policy

choices . Rather, exposure of the agency's

decisional referent s to the critical

scrutiny of others possesses a potential

. . . for improving the degree of objective

rationality of agency decisions." (citation

omitted) (emphasis supplied)

* * *

Thus the APA infuses Section 120.57(1)

proceedings with concer n for agency policy

as well as for facts and law. The [ALJ]

. . . is . . . charged to record, recommend

and critique agency policy as it is revealed

in the record . . . . The [ALJ's] duty to

respond to the evidence in that way cannot

fail to promote resp onsible agency

policymaking . . . . (emphasis supplied ) The

[ALJ's] function . . . encourages an agency

to fully and skillfully expound its nonrule

policies by conventional proof methods

(emphasis supplied); and, in appropriate

cases, subjects agency polic ymakers to the

sobering realization their policies lack

convincing wisdom, and requires them to cope

with the [ALJ's] adverse commentary. Thus

in Section 120.57(1) proceedings the [ALJ]

does not merely find the facts and supply

the law, as would a court. The [ALJ]

"independently serves the public interest by

providing a forum to expose, inform and

challenge agency policy and discretion ."

[citation s omitted] (emphasis supplied)

McDonald , 346 So. 2d at 581 - 583, n. 12 at 583.

1 4 . In the original proceedi ng, t he ALJ critique d agency

policy that the agency revealed in the record by conventional

proof methods . That critique persuaded the agency that the ALJ

f avored the opposing party. T he agency argued to the appellate

court in the Petition for Cert that t he ALJ became "Petitioner's

advocate." However, an ALJ that critiques agency poli cy favors

the performance of his or her duty rather than the party who

benefits from the critique.

15. The duty to critique a gency policy exists in a ny

proceeding conducte d pursuant to Subsection 120.57(1) , including

this proceeding . In this proceeding, t he ALJ m ust examine the

agency 's construction of th e default license provision in

Subsection 120.60(1).

1 6 . Subsection 120.60(1) does not define the term

"license." A l icense can mean the "revocable permission" to

engage in a trade or business . Black's Law Dictionary at 931

(West Pub. Co. 7th ed. 1999) ( hereinafter, Black's ) . A license

can also mean the "document evidencing " such permission .

Black's at 931 .

17 . Under th e first definition, a n applicant is l icensed

when the applicant receives permission to engage in a trade or

business . Under the second definition, an applicant is not

licensed until the appropriate legal authority issues a document

e videncing such perm ission .

18. The term "permission" does not appear in Subsection

120.60(1) , but the statutory term "license" is a synonym for

permission . The American Heritage Dictionary of the English

Language at 1309 (4th ed. Houghton Mifflin Company 2000)

( hereinafter , American Heritage ). Permission denotes "approval"

for a course of action that is granted by a legal authority.

American Heritage at 1309. The statutory term "approve d "

denotes official consent. American Heritage at 88. T he

"license that is considere d a pproved" in Subsection 120.60(1)

denotes consent, or permission, to act .

19 . Subsection 120.60(1) appears to equate approval of a n

application with approval of the license. The statute provides

in relevant part:

Any application for a license that is n ot

approved or denied within the 90 - day . . .

period is considered approved . . . . [A]ny

license that is considered approved shall be

issued . (emphasis supplied)

20 . The passive voice of the sentence referring to the

"license that is considered approved " does not disclose t he

identity of the legal authority that considers the l icense

approved. Pr esumably, the legal authority that considers the

license approved is the author of the sentence , i.e. , the

L egislature.

21 . If the L egislature is the legal a uthority that

approves the default license by operation of the statute, the

applicant is licensed to engage in a trade or business at the

point in time when the L egislature approves the license. T he

agency is not the legal authority that must approve the license

before the applicant can act in his or her trade or business .

Rather, t he agency is the legal authority that is statutorily

required to issue a document evidencing legislative approval .

22 . Before an applicant acts to engage in a trade or

b usiness base d on a default license that the L egislature

approves by operation of Subsection 120.60(1) , the applicant

must provide the agency with written notice of the applicant 's

impending action . In relevant part, Subsection 120.60(1)

provides:

Any appl icant for licensure seeking to claim

licensure by default under this subsection

shall notify the agency clerk of the

licensing agency, in writing, of the intent

to rely upon the default license provision

of this subsection and shall not take any

action bas ed upon the default license until

after receipt of such notice by the agency

clerk.

23 . The statutory prohibitio n is not permanent . The

prohibition lasts only until the agency clerk receives the

requisite notice. Thereafter, no express statutory provis ion

prevent s a default licensee from undertaking act ion to conduct

his or her trade or business.

24. T he statutorily required notice serves at least two

functions. The notice informs an unaware agency of the need to

comply with the statutory mandate to i ssue a do cument evidencing

legislative approval for the applicant to engage in a trade or

business. The notice also provides the agency with a point of

entry to initiate a license revocation proceeding based on

deficiencies disclosed in the application. In such a

procee ding , however, the agency would bear the burden of proving

the grounds for revocation by clear and convincing evidence.

Ferris v . Turlington , 510 So. 2d 292 (Fla. 1987).

25 . The conclusions in t he Amended Recommended Order that

are modifi ed herein were based on an erroneous interpretation .

The error was not necessarily the statutory interpretation that

an applicant has legislative approval to engage in a trade or

business at the point in time when a default license "is

considered approved " by the L egislature pursuant to the

operation of Subsection 120.60(1). The decision in Fugett did

not reach that issue.

26. The error in t he original proceeding was based on two

faulty premises. The first premise was that t he statute

provided adequat e notice to the agency and the applicant of the

ope ration of the statute. The second premise was that the

administrative hearing in the original proceeding provided the

agency with an adequate oppo rtunity to reveal in the record

through conventional proof methods the evidential "predicate"

and "decisional referents" for agency inaction during the

statutory time limit . See McDonald , 346 So. 2d at 581 - 583

(requiring agency policy choices to have a factual predicate in

the record to expose the agency's decis ional referents). 3

27 . T he evidential predicate revealed in the record of the

original proceeding did not include "d ecisional referents" to

explicate a policy of denying the application mor e than 90 days

after receiving it . T he undisputed evidence show ed the agency

issued the Notice of Denial approximately 143 days after the

date of application, and approximately 53 days after the

expiration of the 90 - day time limit . Neither t he Notice of

Denial nor the remaining evidence disclosed that the initial

app licati on was incomplete . The record did not explicate any

additional factual "predicate" or "decisional referent" for

agency inaction during the statutory time lim it .

28 . Subsection 120.60(1) does not e xpressly require any

notice to the agency in additi on to that the L egislature

provides by statute befor e the "licen se . . . is considered

approved . " However, it was error for the ALJ to consider the

license approved after the formal hearing without first giving

the parties an opportunity to present releva nt evidence and

argument . Fugett , 946 So. 2d at 80.

2 9 . The agency interprets the default license provision in

Subsection 120.60(1) to mean that an applicant is not licensed

to engage in a trade or business until the agency issues a

document evidencing l egislative approval. Under the agency's

interpretation, t he statutory prohibition against "action"

without prior notice to the agency clerk takes on a legal ,

rather than common, meaning. The term "action" means a legal or

a dministrative action initiated to prove entitlement to a

license document.

30 . Under the agency's interpretation, t he notice to the

agency clerk provides the agency with an opportunity to avoid a

legal or administrative action by issuing the licen se document .

If a legal o r administrat ive action is necessary, the agency

argues that an applicant has the burden of proving that the

ap plicant is entitl ed to a default license on the ground that

the agency did not deny the application within the statutory

time limit.

31 . In Krakow v. Departm ent of Professional Regulation,

Board of Chiropractic , 586 So. 2d 1271, 1272 (Fla. 1st DCA

1991), the court held that a license application was approved by

operation of the statute following agency inaction within the

statutory time limit. As the First Di strict Court of Appeal

explained in Krakow :

Legislative intent is quite clear in

providing for deemed approval of an

application when the statutory time limit is

violated. Approval by default has the

effect of placing the applicants in the same

position t hey would have enjoyed had the

Department granted approval on the merits

within the [statutory time limit].

(emphasis supplied)

* * *

More importantly, however, the . . . failure

to timely act on these applications

precludes [the agency] fro m exercising its

discretion to determine the applicants'

qualifications for licensure. . . .

Once the [agency] failed to act in a timely

manner, it was precluded from considering

the merits of the . . . application. . . .

Krakow , 586 So. 2d at 1272 - 1273; accord Johnson v. Board of

Architecture and Interior Design , 634 So. 2d 666 (Fla. 2d DCA

1994); Jennings v. Board of Clinical Social Work , 588 So. 2d 656

(Fla. 1st DCA 1991). See also Premier International Travel,

Inc. v. Charles H. Bronson , 843 So. 2d 2 94 (Fla. 1st DCA 2003);

Tuten v. Department of Environmental Protection , 819 So. 2d 187

(Fla. 4th DCA 2002); Florida Academy of Cosmetic Surgery, Inc.

v. Department of Health, Board of Medicine , 771 So. 2d 602 (Fla.

1st DCA 2000).

32 . When the court deci ded Krakow , an insurance "license"

was not defined by statute. 4 Compare Krakow , 586 So. 2d 1271 ,

with §§ 626.112(1) and 626.211, Fla. Stat. ( 1989). In 1995, the

L egislature defined an insurance "license" to mean a document

issued by the agency . The 1995 statute provided:

A "license" is a document issued by the

department authorizing a person to be

appointed to transact insurance or adjust

claims for the classes of insurance

identified in the document.

§ 626.103 , Fla. Stat . (1995).

33 . The statutory d efinition of an insurance license is

substantially unchanged today . § 626.015, Fla. Stat. (2006).

The a gency 's interpretation of the default license provision in

Subsection 120.60(1) is consistent with the statutory definition

of an insurance license.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that Respondent enter a final order concluding

that Petitioner is not licensed to engage in the business of

insurance pursuant to Subs ection 120.60(1) .

DONE AND ENTER ED this 29 th day of June, 2007 , in

Tallahassee, Leon County, Florida.

S

DANIEL MANRY

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 29 th day of June , 2007 .

ENDNOTE S

1/ All statutory references are to Florida Statutes (2005 )

unless stated otherwise.

2/ An a gency statement that interprets law is a rule, within

the meaning of Subsection 120.52(15) , Fl orida Stat utes (2006),

if the statement satisfies the test of general applicability and

does not fall within an express statut ory exception. An agency

statement that interprets la w, is not general ly applicable, and

does not fall within a statutory exception to the definition of

a rule is a st atement of non - rule policy.

3/ Under this interpretation , Subsection 120.60(1) is not the

functional equivalent of an affirmative defense that must be

asserted and proved by the applicant befor e a license is

considered approved by the L egislature . Rather, the agency must

establish a predicate in the record for denying the application

more than 90 days after the date of the initial application .

4 / None of the cited cases involved an application for an

insurance license.

COPIES FURNISHED :

Angelique Knox, Esquire

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

Vincent Robert Fugett, Sr.

146 34th Avenue, North

St. Petersburg, Florida 33704

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

D aniel Sumner , General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 030 7

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.