06-003259RU Jim Harris And Harris Eckland And Associates, Inc. vs. Department Of Financial Services Status: Closed DOAH Final Order on Thursday, January 4, 2007.

Summary: Respondent`s statement used for processing claims is not an unpromulgated rule. The petition for relief is dismissed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JIM HARRIS AND HARRIS ECKLAND )

AND ASSOCI A TES, INC., )

)

Petitioner s , )

)

vs. ) Case No. 0 6 - 3259RU

)

DEPARTMENT OF FINANCIAL )

SERVICE S, )

)

)

Respondent. )

_________________________________)

FINAL ORDER

Pursuant to notice, a final hearing was conducted in this

case on November 1 - 2 , 2006, in Tallahassee, Florida, b efore

Administrative Law Judge R. Bruce McKibben of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: H. Richard Bisbee , Esquire

Bill Reeves , Esquire

1882 Capital Circle, Northeast, Suite 206

Tallahassee, Florida 3230 8

For Respondent: Paul C. Stadler , Esquire

Marion Drew Parker , Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4247

STATEMENT OF THE ISSUE S

The issue s in this case are whe ther the Fast Track Claims

Process developed by the Bureau of Unclaimed Property is a

statement within the meaning of a rule as defined by Section

120.52(15)(a)(1), Florida Statutes, and if so, whether

rulemaking is feasible and practicable under Section

1 20.56(4)(b), Florida Statutes . If so, then w hether the

Department would be in violation of Section 120.54(1)(a),

Florida Statutes . Unless otherwise stated, all references to

Florida Statutes in this Final Order shall be to the 2006

version.

PRELIMIN ARY STATEMENT

Petitioner s filed a "Petition to Determine Invalidity of

Agency Statements Defined a s Rules and Unadopted Rules" on

August 28, 2006 , claiming that a new fast track review process

developed by Respondent was an unpromulgated rule . On

Septemb er 5, 2006, Respondent filed a Motion to Dismiss, stating

that the Fast Track Claim process was not a rule of general

applicability, but was merely an internal procedure for use by

Department personnel only. The Motion was denied. Respondent

then filed a Motion for Summary Final Order on September 11,

2006. This motion alleged the Fast Track Claims process, as set

forth on a one - page outline taken from a Department policy

manual, did not meet the definition of a rule as set forth in

Subsection 120.52, Fl orida Statutes. Further, the motion

alleged lack of standing by the Petitioners . The motion was

denied. On September 15, 2006, Petitioner Harris Eckland and

Associates, Inc. (" HEA ") , filed its own Mo tion for Summary Final

Order averring that the Fast Tr ack Claims procedure was a rule

as defined by statute and interpreted by case law. This motion

was also denied.

At the final hearing held on November 1 - 2 , 2006, Petitioner

called three witnesses: Richard Sweet, assistant bureau chief

of the Bureau of Un claimed Property; Jim Harris, co - owner of

HEA ; and Richard Eckland, co - owner of HEA . Petitioner also

offered into evidence 14 e xhibits. Objections were sustained to

Petitioner 's E xhibit number 8 . The rest of Petitioner's

e xhibits were received in eviden ce. Respondent called two

witnesses: Rick Sweet and Walter Graham, Bureau Chief.

Respondent also offered eight e xhibits into evidence; Exhibits

numbered 1 through 4, 6 , and 8 were received. Official

recognition was also taken of Florida Administrative C ode Rule

69I - 20 .

At the close of the evidentiary portion of the final

hearing, the court reporter advised that the hearing transcript

would be ready shortly after the Thanksgiving holiday . It was

decided that proposed final orders would be due on or befor e

December 15, 2006. Each party duly filed its Proposed Final

O rder and those were taken into consideration by the

Administrative Law Judge in this Final Order.

FINDINGS OF FACT

1. The Florida Department of Financial Services, Bureau of

Unclaimed Pro perty (the "Bureau ” ) , is responsible for

enforcement and administration of the Florida Disposition of

Unclaimed Property Act (the "Act"), Chapter 717, Florida

Statutes. Pursuant to Subsections 717.117 and 717.119, Flori da

Statutes, holders of unclaimed pr operty must report and remit

unclaimed property to the Department. The Department is then

responsible for safeguarding that property, locating its owners,

and processing claims for such property so that it goes to the

rightful owners.

2. Unclaimed prop erty owners may sell the rights to their

property to private investigators, certified public accountants,

or attorneys. HEA is licensed and certified to act as a

representative for owners of unclaimed property and/or to

purchase their interests . HEA is c o - owned by Jim Harris and

Richard Eckland.

3. Petitioner has been in the business of submitting

claims to the Bureau on behalf of claimants since 1994. Prior

to setting up the unclaimed property business, Jim Harris was

employed by the Bureau. He was a n OPS employee working as a

cla ims analyst for approximately eighteen months during calendar

years 1991 to 1993. Jim Harris and Richard E c kland are both

licensed by the Florida Department of Agriculture as private

investigators. HEA is one of the largest unclaimed property

locater businesses in the state.

4. Petitioner's business has grown since its inception ,

and HEA currently submit s about 20,000 claims a year on behalf

of claimants. The majority of claims filed by HEA are for

amounts less than $250. The company uses a computer system ,

which it developed to track down unclaimed property, then

directly mails letters to the owners of the property, offering

to act as the owner's representative. In exchange, HEA is paid

a fee.

5. The two types of cl aims HEA most frequently files are

known as " 106 " and " 108 " claims. A 106 claim is filed by the

apparent owner of the property , whether that person is the

original owner or is someone who has purchased the claim . These

persons may receive a form (DFS - UP - 108) to file their claim by

going on - line to the Bureau's website. A 108 claim is a claim

filed by a representative or agent of the apparent owner ; 108

claims are submitted on form DFS - UP - 108.

6. When HEA purchases an owner's rights to property, i t is

referred to in the industry as a "buy - out" claim. In that

instance , HEA pays the owner an agreed - upon amount up front

(usually within two days of entering into a contract ) , then

files the claim on its own behalf (as the new apparent owner) in

order to rec eive the property from the Bureau. This would

constitute a 106 (apparent owner) claim because HEA has

purchased all rights to the property in question and now owns

the claimed property . Buy - out claims have historically

constituted as much as 80 percent o f Petitioner's business, but

that percentage has been reduced in recent months.

7. HEA relies on an existing line of credit from Hancock

Bank for funds to make buy - out purchases . The line of credit is

tied to a master account belonging to HEA. The ma ster account

is used to replenish HEA's operating account as needed. The

master account is also used to make payments to the line of

credit. Th os e payments are made automatically through an

arrangement with the bank , wherein HEA 's master account is

credi ted or debited depending on the company's mon etary needs on

any given day.

8. The Bureau pays claims via electronic transfer from its

treasury to the owner or owner's agent financial institution .

HEA has an electronic funds transfer (EFT) account set up solely

for the purpose of receiving transfers from the State. The EFT

transfer s to HEA's bank go direct ly in to its master account.

Those funds are then used to pay off the line of credit and/or

are transferred to HEA's operating account, as necessary .

9. HEA 's business has steadily grown since its inception.

There were a couple of years of difficulty when it first

commenced operations , but since that time the business has grown

in volume and revenue each year. During the 2002 - 2003 season,

the Bu reau transferred $558,348.35 to HEA 's EFT account to pay

for claims submitted by HEA . In 2003 - 2004, the amount was

$655,757.81; in 2004 - 2005 the amount rose to $1,168,186.37 ; and

the 2005 - 2006 transfer amount was $1,432,587.79.

10. Historically, HEA was able to represent to its clients

that payment of claims would be made within 60 to 90 days of

filing the claim. There is no statutory or rule requirement

that claims be paid by the Bureau within any specific time

frame, but all claims are required by sta tute to be processed

for payment within 90 days of submission. Nonetheless, payments

were historically made within 60 to 90 days of the date the

claim was submitted. HEA came to rely on this repayment regimen

in its dealing with customers.

11. The Bur eau had a policy in place called Procedure AP

XVII, but that policy is no longer in effect. Th a t policy

included a provision that all claims would be processed in the

order received , apparently regardless of the type of claim. No

such written policy curr ently exists. Still, the Bureau

attempts to process all claims in the order received, to the

extent possible .

12. In April 2006 , HEA began seeing a slowing of payments

for its submitted claims. C laims which had taken an average of

less than 80 days to be paid began to take as long as 90 or even

100 days. This slowdown lasted until June or July 2006 , at

which time the payment times began to take less time for

processing . D ata to review more recent history was not yet

available at the time of the final hearing in this matter .

13. During th e slowdown period , HEA was forced to borrow

$200,000 from a second ba n k in order to maintain it s line of

credit at Hancock Bank. (HEA was r equired to have no more than

85 percent of the line - of - credit amount in ou tstanding

receivables at any point in time . If the A/R amount exceeded 85

percent of the line of credit amount, the ba n k could call the

loan and HEA would have to pay the full outstanding balance.

The $200,000 loan was used to reduce the amount owed on t he line

of credit so that the entire line - of - credit loan would not be

called. This allowed HEA to maintain the credit line and

continue borrowing up to 85 percent of that line to purchase

claims, pay operating expenses, etc.)

14. HEA believes the reaso n they were getting paid more

slowly than normal was that the Bureau had developed a new

payment process that affected payment times. Th e process came

to be referred to as the Fast Track process.

The Fast Track Process

15. In October 2005 , the Bureau developed a new process

for Fast Track Claims. This process would allow certain 106

claims to be automatically processed by the Bureau 's computer

s ystem rather than manually processed . It works along these

lines:

A person would access the Bureau webs ite

to request a form for making a claim. The

computer would automatically determine,

based upon information submitted by the

claimant, whether the claim satisfied all

fast track claim criteria. The form sent

back to the claimant would then contain

eithe r an "F" designation for Fast Track or

the traditional "C" designation for regular

106 claims. The form would be completed and

returned to the Bureau at the appropriate

address.

When the De pa rtment receives a fast track

claim, it is date stamped as th e initial

step. Each eligible fast track claim is

then visually inspected to make sure it

contains a photo identification and that the

claim is signed. Additional research is

needed if either of those elements is

missing.

Next, the rece ipt date is ente red into the

computer system at the same time that other

claim types are entered. The claims are

then returned to the file room for bar

coding, scanning and indexing. Overnight,

the computer updates the claims and

approvable fast track claims are

systema tically approved, routed to the

Approval Level 1 queue , and then (typically)

paid.

16. Fast track claims that are not approvable are sent a

deficiency letter and the claim loses its fast track identity.

In addition, a claim will lose its fast track st atus if the

claimant owes past - due child support, if there is a conflicting

claim, or if additional money has been added to the account so

that it now exceeds the allowable threshold ($1,000.00).

17. Only 106 claims filed by the original owner a re se nt

through the Fast Track Claims Process. The 106 buy - out claims

a re automatically deemed to require additional research because

the Bureau would need to ascertain the validity of the purchase

agreement, verify the change in ownership, etc .

18. The Fa st Track Claims Process resulted in the creation

of one of several new "queue" areas used to process claims. The

purpose of the creation of the Fast Track queue was to allow

automatic process ing of as many claims as possible so that

analysts' time could b e spent making determinations on other

types of claims. Fast track claims are one of the least complex

kinds of claims processed by the Bureau. Therefore, they are

the most easily assimilated into the automatic process. Compare

simple fast track claims to HEA's 106 buy - out claims . Those

kinds of claims require additional work performed by the

analysts. For example:

Since ownership information entered by HEA

does not match the missing owner information

maintained by the Bureau, it must be

verified. In addition, HEA is required to

submit its purchase contracts for review.

The Bureau must determine whether the

contract has been entered within 45 days

from the date of the account being loaded

onto its database. Account numbers and

amounts must be rev iewed. Signatures, dates

and fees must be reviewed. There must be a

full disclosure statement in instances where

the fee caps are exceeded. Payments must be

split. Proof of payment must be included

and verified.

19. It is clear the fast track clai ms can be more

efficiently handled via automatic means, while other claims

require manual attention.

20. The Bureau is processing a greater number of fast

track claims at the present time than it did at the inception of

the program. However, the numb er of claims in the other

categories has drastically risen in recent years as well . In

fiscal year 2001/2002 the Bureau processed 102,312 claims. That

number dropped to 100,437 in 2002/20034. It rose to 163,802 the

next fiscal year, 2003/2004. A rise in claims brought the

number to 169,288 the next year and then jumped to 226,983

claims in 2005/2006. Thus, in four years the number of claims

filed with the state has more than doubled. On August 31, 2005 ,

there were 29,999 claims pending at the Bureau to be processed;

that number jumped to 55,111 a year later, on August 31, 2006.

21. For fiscal year 2005/2006, the Bureau received more

than $354,000,000 of unclaimed property, paid claims for more

than 225,000 accounts worth more than $100,000,000 and

tra nsferred more than $267,000,000 into the State School Board

fund. That fiscal year's receipts and transfer of funds to the

School Board were in excess of $100,000,000 more than fiscal

year 2003/2004.

22. While the number of claims has risen dramatical ly ,

there has not been a concomitant increase in the number of

persons processing the claims. There are approximately ten

analysts reviewing claims, but those employees have other duties

as well. There are 17 FTEs in the claims section to handle

claims, answer telephone inquiries, process mail, etc. Of the

av ailable employees, 10 work full - time to process 106 claims,

five do the 107 claims, and t hree or four concentrate on

108 claims. By comparison, fast track claims are handled by two

employees who ded icate an hour or two per day to process those

claims .

23. The purpose of the Fast Track Claims Process i s to

reduce the number of claims of other types being handled by the

Bureau's staff. The system has resulted in fast track claims

being paid fairly q uickly, averaging about 20 to 30 days.

24. Other types of claims continue to be processed under

the traditional system. Those claims are processed more slowly

than fast track claims, resulting in some backlogs. For

example, a one - day snapshot of pend ing claims on August 31,

2005 , indicated no 108 claims older than 60 days. On the same

date in 2006 , there were 8,828 108 claims over 60 days old.

While this seems on its face to indicate 108 claims are being

paid more slowly , consider that the total num ber of claims for

those two years is significantly different: 7,240 claims in 2005

versus 20,904 claims in 2006. This difference is certainly a

factor in the delays experienced by HEA and others getting

payments for these type claims . Another factor is t hat the

Bureau experiences cyclical increases in volume. Just after the

April 30 reporting cycle (when holders of unclaimed property

notify the Bureau), the number of claims seem s to increase.

This volume has an effect on time frames for processing

payme nts.

25. There is undeniably a four - month period ( approximately

April to July 2006) that HEA 's claims were taking longer to be

paid . That time frame roughly correlates to an increase in the

number of fast track claims. However, the fast track claims

w ere being paid more slowly during that time as well. There is

no evidence as to how quickly or slowly claims were being paid

to other businesses or individuals during that time period.

26. The fast track process allows Bureau employees more

time to dev ote to other types of claims. It is a shortcut

applicable to a limited number of overall claims.

27. The Fast Track Claims process is encapsulated on a one

page diagram located in a 120 - plus page document maintained by

the Bureau. The current Bureau Chief calls the document a

tr aining manual used to teach new employees how to process all

types of claims. The manual was formerly referred to as a

Policy & Procedure Manual by the Bureau. The manual contains

copies of the relevant statutes and rules; i t has a history of

the Bureau , along with data concerning numbers of claims

processed; it explains how electronic transfers work, etc. It

does not, in and of itself, constitute a rule.

28. The form used for fast track claims is the same as the

existin g 106 claim form. It does not generate any rights or

require any additional action by persons making a claim for

property. (The only difference is that fast track claims are

given an F designation and the mailing address for filing the

claim is different than the non - fast tract claims address .) The

form used for fast track claims is an electronically generated

version of the existing 106 form . Claims coming in on the

electronically generated form go directly into a specific queue

for payment. Those cla ims do not require additional review by

the Bureau so the staff workload is reduced as a result .

29. Although the fast track process applies to some 106

claims, it does not apply to all such claims. Nor does it apply

to 108 claims, 110 claims, 112 cla ims or any other type claim.

An applicant is not required to take any additional action

because of the fast track claim process . Rather, if the

applicant's request is deemed eligible, then it will simply be

processed automatically rather than manually . One means of

expediting fast track claims is to allow th em to be mailed to a

different post office b ox than other claims, but use of a

different box is not a rule of general applicability; it is an

internal action by the Bureau.

30. Fast track claims, wh ich make up only about 15 percent

of all 106 claims, are being processed in an average of 20 to 30

days. The 106 buyout claims are taking longer to process due to

the extra verification process. The 106 buy - out claims and 108

claims take approximately th e same amount of time to process.

All claims of every type have increased dramatically in recent

years.

CONCLUSIONS OF LAW

31. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding pursua nt to Sections 120.569 and 120.57(1), Florida

Statutes , and the following subsections:

Subsection 120.54(1)(a), Florida Statutes,

which states:

Rulemaking is not a matter of agency

discretion. Each agency statement defined

as a rule by s. 120.52 shall be adopted by

the rulemaking procedure provided by this

section as soon as feasible and practicable.

Subsection 120.52 (15) , Florida Statutes

which defines a rule:

"Rule" means each agency statement of

general applicability that implements,

interpre ts, or prescribes law or policy or

describes the procedure or practice

requirements of an agency and includes any

form which imposes any requirement or

solicits any information not specifically

required by statute or by an existing rule.

The term also inc ludes the amendment or

repeal of a rule. The term does not

include:

(a) Internal management memoranda which

do not affect either the private interests

of any person or any plan or procedure

important to the public which have no

application outside th e agency issuing the

memorandum.

(b) Legal memoranda or opinions issued to

an agency by the Attorney General or agency

legal opinions prior to their use in

connection with an agency action.

Subsection 120.56(4), Florida Statutes,

states in relevant part:

(4) CHALLENGING AGENCY STATEMENTS DEFINED

AS RULES; SPECIAL PROVISIONS. --

(a) Any person substantially affected by

an agency statement may seek an

administrative determination that the

state ment violates s. 120.54(1)(a). T he

petition shall include the te x t of the

statement or a description of the statement

and shall state with particularity facts

sufficient to show that the statement

constitutes a rule under s. 120.52 and that

the agency has not adopted the statement by

the rulemaking proced ure provided by s.

120.54.

(b) [If] a hearing is held and t he

petitioner proves the allegations of the

petition, the agency shall have the burden

of proving that rulemaking is not feasible

and practicable under s. 120.54(1)(a).

32. Petitioner has s tanding to bring this proceeding. See

NAACP, Inc. v. Florida Board of Regents , 863 So. 2d 294 (Fla.

2004); Jacoby v. Florida Board of Medicine , 917 So. 2d 358 (Fla.

1st DCA 2005). HEA, as owner of claims and on its own behalf,

is affected by the procedur es used by the Bureau to process

unclaimed property claims.

33. A clear understanding of the petition in this case

requires a brief review of the statutory provisions dealing with

the subje ct matter. Chapter 717, Florida Statutes, is entitled

" Florida Di sposition of Unclaimed Property." Section 717.139

states:

This chapter shall be applied and construed

as to effectuate its general purpose of

protecting the interest of missing owners of

property, while providing that the benefit

of all unclaimed and aba ndoned property

shall go to all the people of the state, and

to make uniform the law with respect to the

subject of this chapter among states

enacting it.

34. Florida Administrative Code Rule 69I - 20 was created to

implement Chapter 717. Rule 69I - 20.0 021 sets forth the

procedures for filing claims and processing the claims by the

Department. The rule addresses the forms to be used, directs

that each form must be complete to be processed, and provides

that the Department will make payments once a claim is approved.

The specific duties of Department personnel are not spelled out

by the rule. Those duties are covered by internal memoranda,

policies , and procedures.

35. In Enviro n mental Trust v . State Department of

Environmental Protection , 714 So. 2d 493, 498 (Fla. 1st DCA

1998), the court found:

An agency statement explaining how an

existing rule of general applicability will

be applied in a particular set of facts is

not itself a rule. If that were true, the

agency would be forced to adopt a rule for

every possible variation on a theme, and

private entities could continuously attack

the government for its failure to have a

rule that precisely addresses the facts at

issue. Instead, these matters are left for

the adjudicat ion process under section

1 20.57 , Florida Statutes.

36. The agency statement at issue in this proceeding is an

outline pertaining to how certain 106 claims will be processed

by Bureau employees . Persons filing a 106 claim are not

required to do anything differently with their c laims in order

for it to go the "fast track" route. Rather, once the claim is

filed, it will be processed according to the Department's

internal po licies. If the claim satisfies requisite fast track

criteria, then it is slotted toward the appropriate que ue. If

not, then it goes to a different queue. Therefore, the fast

track process is not generally applicable to all claims, nor

does it create any rights or duties for persons making a claim

for unclaimed property.

37. There is no competent, substanti al evidence to support

Petitioner's contention that the fast track claims process was

the cause of delays in payments for the time period in question.

3 8 . The fast track claims process (as delineated in the

Bureau's policy/training manual) is not a ru le in that it is not

"a statement of general applicability that implements,

interprets, or prescribes law or policy or describes the

procedure or practice requirements of an agency." Rather, it is

solely an internal device used by agency personnel in carr ying

out their assigned duties. T here is no need for the Bureau to

prove that rule - making was either infeasible or impracticable.

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

ORDERED that Petitioners have not established that the Fast

Track Claim Form is a rule within the meaning of Subsection

120.52(15), Florida Statutes. Petitioner's challenge is hereby

dismissed.

DONE AND ORDERED this 4th day of January, 2007 , in

Tallahassee, Leon County, Florida.

S

R. BRUCE McKIBBEN

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 4th day of January, 2007 .

COPIES FURNISHED:

H. Richard Bisbee, Esquire

H. Richard Bisbee, P.A.

1882 Capital Circle Northeast, Suite 206

Tallahassee, Florida 32308

Paul C. Stadler , Es quire

Marion Drew Parker, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Carlos G. M u niz, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Scott Boyd, Executive Director

Joint Administrative Procedures Committee

120 Holland building

Tallahassee, Florida 32399 - 1300

Liz Cloud, Chief

Bureau of Administrative Code

The Elliot Building, Room 201

Tallahassee, Florida 32399 - 0250

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Sectio n 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, accompan ied 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.