20-002933RX Intuition College Savings Solutions, Llc vs. Florida Prepaid College Board Status: Closed DOAH Final Order on Friday, September 25, 2020.

Summary: Petitioner demonstrated that Rules 19B-14.001, 19B-14.002 and 19B-14.003 were each an invalid exercise of delegated Legislative authority.

S TATEMENT O F T HE I SSUE

The issue is wh ether Florida Administrative Code Rules 19B - 14.001, 19B -

14.002, and 19B - 14.003 (collectively the “Rules”), are each an invalid exercise

of delegated legislative authority for the reasons alleged by Petitioner.

P RELIMINARY S TATEMENT

On June 25, 2020, Petit ioner, Intuition College Savings Solutions, LLC

(Intuition or Petitioner), initiated this proceeding by filing a “PETITION TO

DETERMINE THE INVALIDITY OF EXISTING RULES 19B - 14.001, 19B -

14.002, AND 19B - 14.0 03, FLORIDA ADMINISTRATIVE CODE” (Petition).

The Pe tition alleges:

As set forth below, Rules 19B - 14.001, 19B - 14.002

and 19B - 14.003 are an invalid exercise of delegated

legislative authority under Section 120.52(8),

Florida Statutes, because: (1) the Rules enlarge,

modify and/or contravene the statute purpo rtedly

implemented and exceed the Board’s rulemaking authority; (2) the Rules are arbitrary and capricious; (3) the Rules are vague, vesting unbridled discretion with the Board and attempt to create unauthorized jurisdiction at DOAH. The

Rules also contrav ene the mandate set forth in

Section 120.54(5), that state agencies must follow

the Uniform Rules of Procedure unless a special exception is granted.

On June 30, 2020, Acting Chief Judge Robert S. Cohen issued an Order of

Assignment, assigning the matter to the unde rsigned. A telephonic pre -

hearing conference call was held on July 2, 2020. A Notice of Hearing and

Order of Pre - h earing Instructions were issued on July 2, 2020, se tting the

final hearing for July 30, 2020 , in Tallahassee, Florida. The case pro ceeded to

hearing as scheduled.

On July 20, 2020, Florida Prepaid College Board (Board or Respondent),

filed “RESPONDENT’S MOTION TO DISMISS PETITION TO DETERMINE

THE INVALIDITY OF EXISTING RULES 19B - 14.001, 19B - 14.002 AND

19B - 14.003, FLORIDA ADMINISTRAT IVE CODE” (Motion). On July 27,

2020, Petitioner filed its response in opposition to the Motion. On July 28,

2020, an Order Denying the Dismissal of the Petition was issued.

On July 27, 2020, “RESPONDENT’S MOTION TO STRIKE

PETITIONER’S EXPERT WITNESS” (St rike Motion) was filed. The Strike

Motion failed to include whether Petitioner would file a written response (as

required in the Order of Pre - hearing Instructions) and the certification

required by Florida Administrative Code R ule 28 - 106.204(3). An Order

D enying the Strike Motion was issued on July 28, 2020.

On July 29, 2020, the parties filed a Joint Prehearing Stipulation in which

they identified their proposed witnesses and exhibits, set forth their

objections to the other party’s proposed exhibits, and agreed to several

statements of fact and law. The stipulated facts are incorporated below to the

extent relevant.

The parties offered Joint Exhibits 1 through 6, 1 which were admitted in

evidence. Petitioner’s Exhibit 1, the deposition of Walter Hamilton Traylor ,

was proffered over Respond ent’s relevancy objection. The undersigned

reserved ruling on the admission of Pet itioner’s Exhibit 1 in evidence pending

review of the deposition transcript. Having now reviewed Petitioner’s

Exhibit 1, it is not admitte d in evidence. Petitioner’s Exhibit 2 was admitted

1 In the Pre - hearing Stipulation, there were five enumerated exhibits. At hearing, a

numbering error was identified and the parties agreed there were , in fact, six Joi nt Exhibits.

After a review of Joint Exhibits 3, through 5 , the undersigned finds these exhibits are not

related or relevant to the specific issue at hand.

in evidence over Respondent’s objections. Respondent’s Exhibit 1 was

admitted without objection. Respondent’s Exhibits 2 through 32 were

admitted in evidence over Petitioner’s objections. 2

Petitioner pres ented the live testimony of two witnesses, David Maloney,

Esquire, via Zoom Conference ; and Claude Collier, Petitioner’s Chief

Executive Officer and its corporate representative. During Mr. Maloney’s

testimony, Respondent provided the undersigned and oppos ing counsel two

other documents: a copy of chapter 5 of the 2019 edition of the Florida Administrative Practice book ; and a copy of State of Florida, Department of

Health and Rehabilitative Services v . E.D.S. Federal Corp. , 631 So. 2d 353

( Fla. 1st DCA 199 4). These two documents were not offered or received in

evidence.

Respondent presented the live testimony of its corporate representative

William Thompson, Esquire.

The two - volume Transcript of the hearing was filed on August 21, 2020.

3

Both parties ti mely filed Proposed Final Orders (PFOs) on August 31, 2020.

2 In the Prehearing Stipulation :

a. Petitioner’s objections to Respondent’s Exhibits 6 through 8, and 27 through 32 were not

noted . H owever , as the exhibits were being offered, Petitioner voiced relevancy objection s to

each;

b. Respondent listed its Exhibit 8 as “ITN 16 - 01 . ” H owever, in Respondent’s Exhibit Book

Index, Exhibit 8 is listed as “Blank,” which it is;

c. Respondent’s Exhibit 12 contains a completed questionnaire for a gubernatorial appointment with th e individual’s Social Security n umber, which the undersigned has

redacted; and d. Respondent listed its Exhibit 26 as “ Adoption documents and correspondence with the

Department of State and the Joint Administrative Procedures Committee regarding the adoption of the Rules . ” H owever, in the Exhibit Book Index, Exhibit 26 is listed as “Blank,”

which it is .

3 An electronic version of the Transcrip t was filed with DOAH on August 21, 2020, and the

two - volume hard copy of the Transcript with CDs was filed on August 25, 2020.

The PFOs have been given due consideration in the preparation of this Final

Order.

Unless otherwise indicated, all rule and statutory references are to the

current versions.

F INDINGS O F F ACT

1. The Board is the State Agency which administers the Stanley G. Tate

Florida Prepaid College Program (Florida Prepaid College Plan) set forth in

section 1009.98, Florida Statutes, and the Florida College Savings Program (Florida 529 Plan) set forth in s ection 1009. 981, collectively known as the

Plans.

2. Intuition is a Florida corporation authorized to do business in Florida.

Intuition provides services to customers nationwide, including college savings

and prepaid record keeping administra tion services . It is the largest third -

party contractor in the country providing prepaid record keeping

administrative services.

3. The Board and Intuition have entered into a series of contracts over the

past 25 years. The parties entered their last contract on July 1 , 2019, which

called for Intuition to provide customer services and records administration services to the Board. Witnesses for both parties testified about the

possibility of an upcoming contract dispute involving $700,000.00. This issue

prompted the rule challenge.

4. The dispute resolution paragraph in the July 1, 2019 , contract provides

the following in pertinent part:

33. INTERPRETATION, VENUE AND DISPUTE

RESOLUTION

* * *

B. The sole and exclusive manner of resolution of all claims, disputes or controversies related to or arising under or from this Contract shall be

pursuant to Rules 19B - 14.001, 19B - 14.002, and

19B - 14.003, Florida Administrative Code, as

amended from time to time.

5. Rules 19B - 14.001, 19B - 14.002 , and 19B - 14.003, were effecti ve as “New”

on June 20, 1996.

6 . Rule 19B - 14.001, the only rule that has been amended since 1996 , 4

currently provides:

19B - 14.001 Scope

These rules shall apply to the resolution of all

claims, disputes or controversies related to or

arising from contrac ts, including any extensions of

contracts, entered by the Florida Prepaid College

Board on or after the effective date of these rules.

These rules shall constitute the sole procedure for the resolution of all claims under all such contracts. These rules do not apply to advance payment

contracts for the prepayment of Registration Fees,

Local Fees, the Tuition Differential Fee and

dormitory fees.

R ulemaking Authority 1009.971(1), (4), (6) FS.

Law Implemented 1009.971

[ 5 ] FS.

History – New 6 - 20 - 96, Amended 10 - 18 - 10. [ 6 ]

7 . Rule 19B - 14.001 identifies the “Rulemaking Authority” as section

1009.971(1), (4), and (6), and the “Law Imp lemented” as section 1009.971.

4 The r ule was amended in the following ways: the name was changed from Florida Prepaid

Postsecondary Education Expenses Board to Florida Prepaid College Board; the word

“postsecondary” was deleted before “ Registration Fees ” ; the word “registration” was deleted

after the word “dormitory”; “Registration Fees” was capitalized; and the phrase “ Local Fees,

the Tuition Differential Fe e ” was added.

5 Although section 1009.971 is cited as the “Law Implemented , ” these three statutory

subsections: (2) Florida Pr epaid College Board; Membership ; (3) Florida Prepaid Col lege

Board; Elections; Meetings ; and (5) Florida Prepaid College Board; C ontractual Services, are

not applicable to the challenged rules.

6 These history notes are not completely accurate. This rule was amended in 2010 and the

cita tions are accurate for 2010. Florida Administrative Code Rule 1 - 1.012, Legal Citations

and Histor y Notes , provides the specific method to record legal citations and history notes.

Section 1009.971(1), (4), and (6) state in pertinent part:

(1) FLORIDA PREPAID COLLEGE BOARD;

CREATI ON. — The Florida Prepaid College Board is

hereby created as a body corporate with all the

powers of a body corporate for the purposes

delineated in this section. The board shall

administer the prepaid program and the savings

program, and shall perform essen tial governmental

functions as provided in ss. 1009.97 - 1009.988. [ 7 ] For

the purposes of s. 6, Art. IV of the State

Constitution, the board shall be assigned to and

administratively housed within the State Board of

Administration, but it shall independently exercise

the powers and duties specified in ss. 1009.97 -

1009.988.

* * *

(4) FLORIDA PREPAID COLLEGE BOARD;

POWERS AND DUTIES. — The board shall have

the powers and duties necessary or proper to carry

out the provisions of ss. 1009.97 - 1009.988,

inc luding, but not limited to, the power and duty to:

( a) Appoint an executive director to serve as the

chief administrative and operational officer of the board and to perform other duties assigned to him

or her by the board.

(b) Adopt an official seal and rules.

(c) Sue and be sued.

(d) Make and execute contracts and other necessary

instruments.

(e) Establish agreements or other transactions with

federal, state, and local agencies, including state universities and Florida College System

institutions.

7 In 1996 , the statut es addressing the Plans ended at section 1009.984. Sections 1009.985

through 1009.988 were added in 2015; but those additions do not affect the issue h erein.

Further reference to these additional sections 1009.985 through 1009.988 will not be noted.

(f ) Administer the trust fund in a manner that is

sufficiently actuarially sound to defray the

obligations of the prepaid program and the savings

program, considering the separate purposes and

objectives of each program. The board shall

annually evaluate or cause to be evaluated the

actuarial soundness of the prepaid fund. If the

board perceives a need for additional assets in

order to preserve actuarial soundness of the

prepaid program, the board may adjust the terms

of subsequent advance payment contracts t o ensure

such soundness.

(g) Invest funds not required for immediate

disbursement.

(h) Appear in its own behalf before boards,

commissions, or other governmental agencies.

(i) Hold, buy, and sell any instruments, obligations,

securities, and property de termined appropriate by

the board.

(j) Require a reasonable length of state residence

for qualified beneficiaries.

(k) Segregate contributions and payments to the

trust fund into the appropriate fund.

(l) Procure and contract for goods and services,

emp loy personnel, and engage the services of

private consultants, actuaries, managers, legal counsel, and auditors in a manner determined to be necessary and appropriate by the board.

(m) Solicit and accept gifts, grants, loans, and other

aids from any sourc e or participate in any other

way in any government program to carry out the

purposes of ss. 1009.97 - 1009.988.

(n) Require and collect administrative fees and

charges in connection with any transaction and

impose reasonable penalties, including default, f or

delinquent payments or for entering into an

advance payment contract or a participation

agreement on a fraudulent basis.

(o) Procure insurance against any loss in connection

with the property, assets, and activities of the trust

fund or the board.

(p) Impose reasonable time limits on use of the

benefits provided by the prepaid program or

savings program. However, any such limitations

shall be specified within the advance payment

contract or the participation agreement,

respectively.

(q) Delineate the terms and conditions under which

payments may be withdrawn from the trust fund

and impose reasonable fees and charges for such

withdrawal. Such terms and conditions shall be specified within the advance payment contract or the participation agreement.

(r) Provide for the receipt of contributions in lump

sums or installment payments.

(s) Require that purchasers of advance payment

contracts or benefactors of participation

agreements verify, under oath, any requests for

contract conversions, substitutions, t ransfers,

cancellations, refund requests, or contract changes

of any nature. Verification shall be accomplished as authorized and provided for in s. 92.525(1)(a).

(t) Delegate responsibility for administration of one

or both of the comprehensive investmen t plans

required in s. 1009.973 to persons the board

determines to be qualified. Such persons shall be compensated by the board.

(u) Endorse insurance coverage written exclusively

for the purpose of protecting advance payment

contracts, and participation agreements, and the

purchasers, benefactors, and beneficiaries thereof,

including group life policies and group disability

policies, which are exempt from the provisions of

part V of chapter 627.

(v) Form strategic alliances with public and private

enti ties to provide benefits to the prepaid program,

savings program, and participants of either or both

programs.

(w) Solicit proposals and contract, pursuant to

s. 287.057, for the marketing of the prepaid

program or the savings program, or both together. A ny materials produced for the purpose of

marketing the prepaid program or the savings

program shall be submitted to the board for review. No such materials shall be made available to the public before the materials are approved by the board. Any educationa l institution may distribute

marketing materials produced for the prepaid program or the savings program; however, all such materials shall be approved by the board prior to distribution. Neither the state nor the board shall

be liable for misrepresentatio n of the prepaid

program or the savings program by a marketing

agent.

(x) Establish other policies, procedures, and criteria

to implement and administer the provisions of

ss. 1009.97 - 1009.988.

(y) Adopt procedures to govern contract dispute

proceedings b etween the board and its vendors.

(z) Amend board contracts to provide Florida

ABLE, Inc., or the Florida ABLE program with

contractual services.

(aa) Adopt rules relating to the purchase and use of

a prepaid college plan authorized under s. 1009.98 or a college savings plan authorized under

s. 1009.981 for the Gardiner Scholarship Program

pursuant to s. 1002.385, which may include, but need not be limited to:

* * *

(6) QUALIFIED TUITION PROGRAM STATUS. —

Notwithstanding any other provision of ss. 1009.97 -

1009.984, the board may adopt rules necessary for

the prepaid program and the savings program each

to retain its status as a “qualified tuition program”

in order to maintain its tax - exempt status or other

similar status of the program, purchasers, and

qualified beneficiaries under the Internal Revenue

Code. The board shall inform participants in the

prepaid program and the savings program of

changes to the tax or securities status of advance

purchase contracts and participation agreements.

8 . Rule 19B - 14.001 provides, in plain language, “[t]hese rules shall apply

to the resolution of all claims, disputes or controversies related to or arising

from contracts” and “shall constitute the sole procedure for the resolution of

all claims under all such con tracts.” The term “shall” is defined as “directives

to express what is mandatory.” See Merriam - Webster On - line Dictionary

( https://www.merriam - webster.com/dictionary/shall ) .

9 . Rule 19B - 14.002 provides the following:

19B - 14.002 Initiating Proceedings Rel ated to

Contracts with the Board.

(1) Any person or firm that has entered into a

contract with the Board and has been adversely affected by a decision of the Board or its employees

concerning such contract shall file a written

petition to contest the deci sion with the Board

within 21 days of the date of the receipt by such person or firm of the decision. The notice of the

decision shall be provided in writing to the person

or firm by the Executive Director. The date of

receipt of the notice shall be either the date on

which the notice is received by the person or firm if the notice is sent by registered mail or by other

means of delivery which results in a receipt for

delivery or the date of the decision plus five days if

the notice is sent by regular mail. Any person or

firm who receives such written notice of the

decision and who fails to request a hearing within

twenty - one days, shall have waived his right

subsequently to request a hearing on such matters.

(2) The petition shall include the following:

( a) The name and business address of the person or

firm which claims to be adversely affected by a

decision of the Board or its employees;

(b) A concise statement of the ultimate facts upon

which the claim arose;

(c) The date and subject of the contract un der

which the claim arose;

(d) A statement of all disputed issues of material fact upon which the claim is based or, if there are

none, the petition shall so indicate;

(e) A concise statement which explains how the substantial interests of the person or firm are

affected by the decision of the Board or the Board’s

employees;

(f) A concise statement of the provisions of the contract together with any fed., state and local

laws, ordinances or code requirements or

customary practices and usages in the indus try

asserted to be applicable to the questions presented

by the claim;

(g) The demand for relief sought by the claimant;

(h) The date of the occurrence of the event or events

which gave rise to the claim and the date and

manner of the Contractor’s complia nce with the

contract; and

(i) Any other material information the person or firm contends is material to its claim.

(3) The written petition shall be printed,

typewritten or otherwise duplicated in legible form.

The petition shall include copies of all d ocuments

which support the claim.

Rulemaking Authority 1009.971(1), (4), (6) FS.

Law Implemented 1009.971 FS. History – New 6 - 20 -

96. [ 8 ]

1 0 . Rule 19B - 14.002(1) clearly states that any person or firm (vendor)

“shall file a written petition to contest the dec ision with the Board within 21

days of the date of the receipt by such person or firm of the decision.” The

next sentence provides the method by which the specific date of receipt of the

notice is determined, and when the clock starts ticking for the affec ted vendor

to file a written petition. However, the rule fails to establish a time frame in

which Respondent must issue the notice once the adverse decision is made.

Further, there are no specific requirements for the content of the written

notice, such as explaining the basis for the adverse decision. Although

Mr. Thompson asserted that any affected vendor could file a written petition

to contest any adverse decision by the Board or a Board employee, there is no

such language in the rule, the “sole procedure” for a vendor to do so.

1 1 . Rule 19B - 14.002(2) provides specific requirements for the written

petition. Although a vendor may be able to include some of the required information for the written petition, the requirement that the vendor “shall”

provide a “concise statement of the ultimate fa cts upon which the claim

arose”; a “statement of all disputed issues of material fact upon which the

claim is based ... ” ; and a “concise statement which explains how the

substantial interest of the person or f ir m are affected by the decision of the

Board or the Board’s employees” is impossible without specific information

from Respondent as to the circumstances giving rise to the adverse decision.

Mr. Thompson testified there was nothing to preclude an affected vendor

from filing a public records request seeking the information desired.

8 These citations are not accurate. I n 1996, Respondent listed secti ons 120.53(1) and

240.551(5), Florida . Stat utes (1995), as the “Specific Authority” and s ection 240. 551 as the

“Law Implemented.” Rule 1 - 1.012 , Legal Citations and History Notes , provides the specific

method to record legal citations and history notes.

However, this is contrary to the specific language of the rule, which neither

requires the Board to explain the basis for their adverse decision nor provides

any procedure for a n adversely affected vendor to obtain the information

necessary to file a written petition . T here is no such language i n the rule, the

“sole procedure ” for a vendor to do so.

1 2 . Rule 19B - 14.003 provides the following:

19B - 14.003 Resolution of Claims.

(1) Upon receipt of a formal written petition, the

Executive Director shall attempt to resolve the

matters that are the subject of the petition by mutual agreement within fifteen (15) days, excluding Saturdays, Sundays, and legal holidays.

(2) If the petitio n is not resolved by mutual

agreement within fifteen (15) days, excluding

Saturdays, Sundays and legal holidays, the Executive Director shall deliver, within forty - five

(45) days from the date such petition was filed, to the person or firm that filed the p etition a

determination that indicates the Board’s written response to the claims or such person or firm.

(3) Unless the person or firm who filed the petition

agrees to the determination of the Board and a

consent order adopting the determination is enter ed within thirty (30) days from the receipt by

the person or firm of the Board’s determination, the

Executive Director, if no disputed issues of material

fact are involved, shall designate a hearing officer who shall conduct an informal proceeding pursuant

to Section 120.57(2), F.S., and applicable Board

rules. The hearing officer designated by the

Executive Director shall be either a person who is a member in good standing of the Florida Bar or a person knowledgeable by virtue of education or

practical exp erience with the subject matter of

similar contracts involving state agencies.

(4) If there is a disputed issue of material fact, the

Executive Director shall refer the petition to the

Division of Administrative Hearings of the

Department of Management Se rvices for proceedings under Section 120.57(1), F.S.

(5) Once the Executive Director has referred the

dispute to a hearing officer pursuant to subsection

(3) or (4), no further information or amendment of

the claims shall be permitted.

(6) The statements , facts, documents and materials

contained in the petition filed pursuant to Rule

19B - 14.002, F.A.C., or which are submitted to and

received by the Executive Director prior to the

determination made pursuant to subsection 19B -

14.003(2), F.A.C., shall const itute the entire factual

record submitted by a person or firm on which a claim against the Board may be sustained in any

hearing under this rule. A person or firm making a

claim against the Board shall not be allowed to submit to a hearing officer any stat ements, facts,

documents or materials to support any claim

against the Board which were not submitted to the

Executive Director by the person or firm making

the claim prior to the Executive Director’s determination pursuant to subsection 19B -

14.003(2), F.A .C. The Board may submit

statements, facts, documents or materials in

response to the factual record submitted by a

person or firm making a claim against the Board or to sustain the decision of the Executive Director which was made pursuant to subsection 1 9B -

14.003(2), F.A.C.

(7) The filing of a petition by a person or firm

pursuant to the provisions of this rule shall not

affect the duty or obligation of the person or firm

pursuant to the contract under which the claim or dispute arose. Any person or firm which files a

petition pursuant to the provisions of this rule

expressly agrees that it shall continue to proceed

with all scheduled work as determined under any

prior existing schedule pursuant to such contract

unless otherwise agreed in writing between the

person or firm and the Board.

Rulemaking Authority 1009.971(1), (4), (6) FS.

Law Implemented 1009.971 FS. History – New 6 - 20 -

96 . [ 9 ]

1 3 . Rule 19B - 14.003(1) adds the word “formal” before “written petition” in

the first sentence. The addition of this one word, without any definition and

without any previous mention in rule 19B - 14.001 ( the “sole procedure” ),

imposes another requirement on vendors. Yet, there is no direction provided

as to what that “formal written petition” includes. Respondent aptly states in

its PFO: “A rule may be vague if it does not define important terms or

standards.” Such is the case when a word is inserted and not defined. The

remainder of rule 19B - 14.003(1) places a duty on the Board’s Executive

Director to attempt a resolution of the “formal written petition” within 15 business days of its receipt.

1 4 . Rule 19B - 14.003(3) establishes that if no resolution is reached, the

matter is referred to a hearing officer designated by the Board’s Executive

Director for a hearing not involving disputed issues of fact ( formerly and commonly referred to as an “informal hearing” ). This informal hearing is to

be conducted pursuant to section 120.57(2) , Florida Statutes .

1 5 . Rule 19B - 14.003(4) establishes that if no resolution is reached, the

matter is referred to DOAH for a hearing involving disputed issues of fact

( formerly and commonly referred to as a “formal hearing”), “for proceedings

under s ection 120.57(1),F.S.”

1 6 . However, rule 19B - 14.003(5) provides that regardless of which referral

is ma de (either rule 19B - 14.003(3) or (4)), “ no further information or

amendment of the claims shall be permitted.” This, in effect , precludes the

discovery process at DOAH , and purports to cut off the authority of the

presiding administrative law judge to gra nt leave to amend the petition.

9 See Footnote 8 above.

1 7 . Rule 19B - 14.003(6) then proceeds to place further restrictions on how

either hea ring (informal or formal ) m ust proceed. S ubs ection (6) restricts

what “shall constitute the entire factual record” to the “statements, fact s,

documents and materials contained in the petition , ” and that which is

“submitted to and received by the Executive Director prior to the

determination made pursuant to subsection Rule 19B - 14.003(2), F.A.C.” This

phrase is emphasized again with the follow ing statement: “ [A] person or firm

making a claim against the Board shall not be allowed to submit to a hearing

officer any statements, facts, documents or materials to support any claim

against the Board which were not submitted ... prior to the Executive

Director’s determination.” (Emphasis added) . However, the Board, itself ,

“may submit statements, facts, documents or materials in response to the

factual record submitted by person or firm making a claim against the Board ,

or to sustain the decision of th e Executive Director which was made pursuant

to subsection 19B - 14.003(2), F.A.C.”

1 8 . Overall, these three rules set forth the procedures, in either informal

or formal proceedings, to adjudicate contractual disputes. To prohibit the

adversely affected par ty from fully prosecuting their claim, while allowing the

Board to submit additional material to the trier of fact is not fair, and is

contrary to the procedures in place at DOAH , contrary to several statutory

provisions found in section s 120.569 and 120.5 7(1), and the discovery

permitted at DOAH under the Florida R ules . of Civ il . Proc edures . The phrase

“judge, jury, and executioner” may not be an incorrect analogy.

19 . Each rule cites as its “ Rulemaking Authority ” section 1009.97(1), (4) ,

and (6). The Boar d is a creature of the Florida Statutes, created by section

1009.971(1), “with all the powers of a body corporate,” yet subsection (1) does

not provide any rulemaking authority. Further, nowhere does this section

grant the Board the ability to adopt rules to bind another state agency , that

is governed by different statutes and rules .

2 0 . Section 1009.971(6) allows the Board to “adopt rules necessary for the

prepaid program and the savings program... to maintain its tax - exempt

status or other similar statu s of the program,” but does not specifically

provide that the Board may impose its rules on another state agency.

2 1 . Section 1009.971(4) (b) grants the Board the “power and duty to…

(a)dopt an official seal and rules.” This subsection does not expound on w hat

the rules may impart, and thus does not grant the specific authority to do

more.

2 2 . Section 1009.971(4) (y) grants the Board the “power and duty to…

“(a)dopt procedures to govern contract dispute proceedings between the board

and its vendors.” Althoug h the Board has the ability to adopt rules, that

authority does not grant the Board the ability to impose its “procedures” on

another state agency that is governed by different statutes and rules.

2 3 . The term “procedures” is not defined in the statute. The common

definition of procedures is “a particular way of accomplishing something.” See Merriam - Webster On - line Dictionary ( https://www.merriam -

webster.com/dictionary/procedure ). In the legal arena, the term “procedure” is

defined as “[T]hat which regula tes the formal steps in an action or other

judicial proceeding; a form, manner, and order of conducting suits or prosecutions.” Black’s Law Dictionary 1368 (4th ed. 1968). Another

characterization of the term “procedure” is the structure for carrying on a

lawsuit, including the pleadings, discovery process, evidence , and practice.

2 4 . The Division 10 provides independent administrative law judges to

conduct hearings pursuant to sections 120.569 and 120.57(1), and other laws .

2 5 . Section 120.569 sets forth th e type of proceedings to be conducted:

“Decisions which affect substantial interests.” The petition for a hearing is

10 The Division operates two distinct programs: the adjudication of administrative cases by

administrative law judges (ALJ s ); and the adjudication of workers’ compensation claims by

the judges of compensation claims . In this instance, the Division employs AL Js to conduct

hearings in which the substantial interests of a person or entity are determined by an agency

and involve a disputed issue of material fact.

filed with the affected agency, which in turn has 15 days to notify DOAH,

although the parties may attempt to resolve the dispute and a del ay in

sending the case to DOAH occurs. Once the case is at DOAH, an ALJ is assigned and the affected agency is mandated to “take no further action w ith

respect to the proceedin g ... except as a party litigant, as long as the division

has jurisdiction over the p roceeding under s. 120.57(1).” The “presiding officer

has the power to swear witnesses and take their testimony under oath, to

issue subpoenas, and to effect discovery on the written request of any party

by any means available to the courts ... . ” See § 120.569(2)(f) , Fla. Stat .

Further, the presiding officer shall exclude irrelevant, immaterial, or unduly

repetitious evidence, while allowing “all other evidence of a type commonly

relied upon by reasonably prudent persons in the conduct of their affair s ... . ”

See § 120.569(2)(g) , Fla. Stat .

2 6 . The Florida Administration Commission, composed of the Governor

and Cabinet, adopted the hearing procedures that DOAH utilizes, commonly

referred to as the Uniform Rules. See §§ 14.202 and 120.54(5) , Fla. Stat.

Chapter 28 - 106, Part I, sets forth the general provisions that apply to “all

proceedings in which the substantial interest of a party are determined by the agency and shall be construed to secure the just, speedy , and inexpensive

determination of every pro ceeding.” Part II sets forth those processes for

hearings involving disputed issues of material fact, which are at specific odds

with r ule 19B - 14.003.

11 Section 120.54(5)(a)2. provides that an “agency may

seek exceptions to the uniform rules of procedure by filing a petition with the

Administration Commission.” T he Board provided no evidence that it ha s

sought and received an exception that would authorize the challenged rules .

11 Chapter 28 - 106 , Part III , provides the uniform procedures for proceedings and hearings

not involv ing disputed issues of material fact; Part IV provides the uniform procedures for

mediations; Part V provides the process for emergency actions; and Part VI provides conflict

direction.

2 7 . It is true that the Board can adopt procedures to govern contract

dispute pro ceedings. However, the challenged rules, read separately and as a

whole, are an invalid exercise of delegated legislative authority.

C ONCLUSIONS O F L AW

2 8 . DOAH has jurisdiction over the parties to and subject matter of this

proceeding pursuant to sectio n 120.56.

29. Rulemaking is a legislative function within the exclusive authority of

the Legislature. See Art. II, § 3 Fla. Const. An administrative rule is valid

only if adopted under a proper delegation of legislative authority. See Askew

v. Cross Key Wa terways , 372 So. 2d 913 (Fla.1978); Chiles v. Children A, B, C,

D, E, and F , 589 So. 2d 260 (Fla. 1991).

30. The purpose of a rule challenge proceeding is “to determine the facial

validity of [the challenged rules], not to determine their validity as appli ed to specific facts, or whether the agency has placed an erroneous construction on

them.” Fairfield Communities v. Fla. Land & Water Adj. Comm’n , 522 So. 2d

1012, 1014 (Fla. 1st DCA 1988).

31. Section 120.56(1)(a) provides that “[a]ny person substantially affected

by a rule ... may seek an administrative determination of the invalidity of the

rule on the ground that the rule is an invalid exercise of delegated legislative

authority.”

32. To establish standing under the “substantially affected” test, a part y

must demonstrate that: 1) the rule will result in a real and immediate injury in fact, and 2) the alleged interest is within the zone of interest to be

protected or regulated. Jacoby v. Fla. Bd. of Med. , 917 So. 2d 358 (Fla. 1st

DCA 2005); see also Fla. Bd. of Med. v. Fla. Acad. of Cosmetic Surgery , 808

So. 2d 243, 250 (Fla. 1st DCA 2002), superseded on other grounds, Dep’t of

Health v. Merritt , 919 S o. 2d 561 (Fla. 1st DCA 2006). As a vendor of the

Board, Petitioner is directly regulated by the challenge d rules. The parties

acknowledged the possibility of an upcoming contract dispute which

prompted this rule challenge. Intuition has standing to challenge the rules in

this proceeding.

33. In accordance with section 120.56, Petitioner is challenging exist ing,

as opposed to proposed, rules. Section 120.56 sets forth the specific method by

which a rule challenge petition is filed, and how it will be adjudicated.

Section 120.56(1)(e) provides that a hearing held under this statute is “de

novo in nature” and r equires Petitioner to prove by a preponderance of the

evidence that the existing rules are an invalid exercise of delegated

legislative authority as to the objections raised.

34. A preponderance of the evidence has been defined as “the greater

weight of th e evidence,” or evidence that “more likely than not” tends to prove

a certain proposition. Gross v. Lyons , 763 So. 2d 276, 280 n.1 (Fla. 2000).

35. Section 120.52(8) defines the term “invalid exercise of delegated

legislative authority” as follows:

(8) “Invalid exercise of delegated legislative

authority” means action that goes beyond the

powers, functions, and duties delegated by the

Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if

any one of the following applies:

(a) The agency has materially failed to follow the

applicable rulemaking procedures or requirements set forth in this chapter;

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is required

by s. 120.54(3) (a)1.;

(c) The rule enlarges, modifies, or contravenes the

specific provisions of law implemented, citation to which is required by s. 120.54(3)(a)1.;

(d) The rule is vague, fails to establish adequate

standards for agency decisions, or vests unbridled

discretion in the agency;

(e) The rule is arbitrary or capricious. A rule is

arbitrary if it is not supported by logic or the

necessary facts; a rule is capricious if it is adopted

without thought or reason or is irrational; or

(f) The rule imposes regu latory costs on the

regulated person, county, or city which could be

reduced by the adoption of less costly alternatives

that substantially accomplish the statutory

objectives.

A grant of rulemaking authority is necessary but

not sufficient to allow an ag ency to adopt a rule; a

specific law to be implemented is also required. An

agency may adopt only rules that implement or interpret the specific powers and duties granted by the enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious or is within the agency’s class of powers and duties, nor

shall an agency have the authority to implement

statutory provisions setting forth general

leg islative intent or policy. Statutory language

granting rulemaking authority or generally describing the powers and functions of an agency

shall be construed to extend no further than

implementing or interpreting the specific powers

and duties conferred by the enabling statute.

See also § 120.536(1), Fla. Stat. (repeating the “flush - left” paragraph found at

the end of section 120.52(8)).

36. In its Petition, Petitioner identified three bases in section 120.5 2( 8 ) for

invalidating the rules: 1 ) the rules enl arge, modify , and/or contravene the law

purportedly implemented and exceed s the Board’s rulemaking authority in

violation of section 120.52(8)(c ); 2) the rules are vague, fail to establish

adequate standards for agency decisions, or vest unbridled discreti on in the

agency in violation of section 120.52(8)(d); and 3) the rules are arbitrary and

capricious in violation of section 120.52(8)(e).

37. The rules exceed the grant of rulemaking authority by establishing a

“sole procedure” for vendors to resolve all claims while imposing the Board’s

jurisdiction al procedures o n another state agenc y. The rules specifically

preclude additional facts or evidence from consideration in an informal or

formal hearing . Section 1009.971 does not authorize the imposition of th e

Board’s rules over the adjudicatory process. The Legisla ture has dictated that

disputed – fact hearings at DOAH “shall be de novo.” §120.57(1)(k), Fla. Stat.

38. Section 120.52(8)(e) declares that a rule is an invalid exercise of

delegated legislative auth ority when it is arbitrary and capricious. The

statute incorporates a longstanding definition of the term, stating that a rule

is arbitrary if it “is not supported by logic or the necessary facts.” A rule is

capricious “if it is adopted without thought or reason or is irrational.” See

Dravo Basic Materials Co. v. Dep’t of Transp. , 602 So. 2d 632, 634 (Fla. 1st

DCA 1992).

39. The rules state a written petition is to be filed when an adverse action

has occurred and notice given, but fails to include when the notice is to be

provided to the affected vendor , or what details are required to be in the

notice. Yet the vendor must somehow specify all disputes in its written

petition with no procedure to obtain the information, and no right to seek

amendment. Taken t ogether, these provisions are irrational, creating an

impossible one - sided stacked deck against the vendor seeking to challenge an

adverse decision or action . Add to that the lack of details as to what the

notice is to provide to the affected vendor is mos t troublesome.

40. As used in section 120.52(17), the term “ rulemaking authority” is

defined to mean “statutory language that explicitly authorizes or requires an agency to adopt, develop, establish, or otherwise create any statement coming

within the def inition of the term ‘ rule ’ ”.

41. The term “ law implemented ” is defined to mean “ the language of the

enabling statute being carried out or interpreted by an agency through

rulemaking. ” § 120.52(9), Fla. Stat.

42. Generally, under the Administrative Procedu re Act, each agency rule

must be accompanied by a reference to specific rulemaking authority and a

reference to the section of the Florida Statutes or Laws of Florida bei ng

implemented or interpreted. § 120.54(3)(a)1., Fla. Stat.

43. In Southwest Florida Water Management District v. Save the Manatee

Club, Inc. , 773 So. 2d 594 (Fla. 1st DCA 2000), the First District Court of

Appeal considered a challenge to rule provisions which granted exemptions to

certain permitting requirements based upon prior governme ntal approval in

relation to the flush - left paragraph. The agency had been delegated the

power to establish exemptions, but the power was qualified: only exemptions

that did not “ allow significant adverse [environmental] impacts to occur ”

could be granted. Id. at 600.

44. The court found that the language prohibiting agencies from adopting

any rules except those “ that implement or interpret the specific powers and

duties granted by the enabling statute ” is clear and unambiguou s. The court

also observed that “[i]n the context of the entire sentence, it is clear that the

authority to adopt an administrative rule must be based on an explicit power

or duty identified in the enabling statute. Otherwise, the rule is not a valid

exercise of delegated legislative au thority.” Id . 599 .

45. In interpreting a state statute or rule, a state court or an officer

hearing an administrative action pursuant to general law may not defer to an

administrative agency’s interpretation of such statute or rule and, instead,

must inte rpret such statute or rule de novo. Art V, § 21 , Fla. Const.

( Amendment No. 6 in the 2018 election cycle. ). The late Justice Anton Scalia

foreshadowed the policy adopted by this recent constitutional amendment

when he wrote: “It seems contrary to fundament al principles of separation of

powers to permit the person who promulgates a law to interpret it as well.” See Talk Am . , Inc., v Mich . Bell Tel . Co. , 564 US 50, 68 (2011).

46. Petitioner has met its burden as to each rule based on section

120.52(8)(b), (c), (d), and/or (e). These rules enlarge, modify , and/or contravene

the statute they purportedly implemented, and exceed the Board’s

rulemaking authority. The se rules are contrary to the governing statutes and

rules for adjudication at DOAH .

47. Section 120. 595(3) , pr ovides:

If the appellate court or administrative law judge

declares a rule or portion of a rule invalid pursuant

to s. 120.56(3) or (5), a judgment or order shall be

rendered against the agency for reasonable costs

and reasonable attorney’s fees , unless the agency

demonstrates that its actions were substantially

justified or special circumstances exist which would

make the award unjust. An agency’s actions are “substantially justified” if there was a reasonable basis in law and fact at the time t he actions were

taken by the agency. If the agency prevails in the

proceedings, the appellate court or administrative

law judge shall award reasonable costs and reasonable attorney’s fees against a party if the appellate court or administrative law judge

d etermines that a party participated in the

proceedings for an improper purpose as defined by

paragraph (1)(e). No award of attorney’s fees as

provided by this s ubsection shall exceed $50,000.

48. Inasmuch as this Final Order determine s that the challenge d rules are

each an invalid exercise of delegated legislative authority as defined in

section 120.52(8) (b), (c),(d), and /or (e), Petitioner is entitled to a hearing as to

entitlement and, if entitled, the amount of any reasonable fees and costs.

O RDER

Base d on the foregoing Findings of Fact and Conclusions of Law, it is

O RDERED that Rules 19B - 14.001, 19B - 14.002, and 19B - 14.003 are each

individually an invalid exercise of delegated legislative authority.

Jurisdiction is retained for the purpose of determinin g whether attorney’s

fees and costs are warranted and, if so, the amount. Any motion to determine

fees and costs shall be filed within 60 days of the issuance of this Final Order.

D ONE A ND O RDERED this 25th day of September , 2020 , in Tallahassee,

Leon Coun ty, Florida.

L YNNE A. Q UIMBY - P ENNOCK

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www .doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 25th day of September , 2020 .

C OPIES F URNISHED :

Maureen M. Hazen, General Counsel

State Board of Administration

1801 Hermitage Boulevard

Post Office Box 13300

Tallaha ssee, Florida 323 17 - 3300

(eServed)

J. Stephen Menton, Esquire

Rutledge Ecenia, P.A.

119 South Monroe Street, Suite 202

Post Office Box 551 (32302)

Tallahassee, Florida 32301

(eServed)

Tana D. Storey, Esquire

Rutledge Ecenia, P.A.

119 South Monroe Stree t , Suite 202

Tallahassee, Florida 32301

(eServed)

Brandon J. Goeke, MBA

Florida Prepaid College Board

1801 Hermitage Boulevard , Suite 210

Tallahassee, Florida 32308

George T. Levesque, Esquire

Gray Robinson, P.A.

301 South Bronough Street Suite 600 ,

Tallahassee, Florida 32301

(eServed)

Jason Alec Zimmerman, Esquire

Gray Robinson, P.A.

301 East Pine Street

Orlando, Florida 32801

(eServed)

Ken Plante, Coordinator

Jonit Admin istrative Proce e d ure Committee

Room 680, Pepper Building

111 West Madison S treet

Tallahassee, Florida 32399 - 1400

(eServed)

Ernest Reddick, Program Administrator

Florida Administrative Code and Register

Department of State

R.A. Gray Building

500 South Bronough Street

Tallahassee, Florida 32399 - 0250

(eServed)

Anya Grosenbaugh

F lorida Administrative Code and Register

Department of State

R.A. Gray Building

500 South Bronough Street

Tallahassee, Florida 32399 - 0250

(eServed)

N OTICE O F R IGHT T O J UDICIAL R EVIEW

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 administrative appeal with the agency clerk of the D ivision of Administrative Hearings within 30 days of

rendition of the order to be reviewed, and a copy of the notice, accompanied

by any filing fees prescribed by law, with the clerk of the d istrict c ourt of

a ppeal in the appellate district where the agenc y maintains its headquarters

or where a party resides or as otherwise provided by law.