88-003421F Jack J. Rudloe And Gulf Specimen Company, Inc. vs. Dickerson Bayshore, Inc., And Department Of Environmental Regulation Status: Closed DOAH Final Order on Tuesday, November 8, 1988.

Summary: Third-party objector was prevailing party where DER denied permit application after initially indicating intent to grant. DER more than nominal party

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JACK J. RUDLOE and GULF )

SPECIMEN COMPANY, INC., )

)

Petitioners, )

)

vs. ) CASE NO. 88-3421F

)

DEPARTMENT OF ENVIRONMENTAL )

REGULATION, )

)

Respondent. )

___________________________________)

FINAL ORDER

This matter came on for final hearing in Tallahassee, Florida, before

Robert T. Benton, II, Hearing Officer of the Division of Administrative

Hearings, on September 14, 1988. Petitioner's proposed recommended (sic) order

and the proposed final order of State of Florida Department of Environmental

Regulation, were filed on October 10, 1988. The parties are represented by

counsel:

APPEARANCES

For Petitioners: Charles A. McMurry

1363 East Lafayette Street, Suite C

Tallahassee, Florida 32301

For Respondent: Carol A. Forthman

2600 Blair Stone Road

Tallahassee, Florida 32399-2400

By motion for fees and costs, petitioners assert entitlement to recover

costs and fees from the Department of Environmental Regulation (DER) under

Section 57.111, Florida Statutes (1987) and Rule 22I-6.035, Florida

Administrative Code. As objectors to a dredge and fill permit DER proposed to

grant, petitioners participated in formal administrative proceedings that

eventuated in a final order denying the permit application. Jack J. Rudloe and

Gulf Specimen Company, Inc. vs. Dickerson Bayshore, Inc. and State of Florida,

Department of Environmental Regulation, No. 87-3175 (DER; June 9, 1988).

ISSUES

Whether a small business party who petitioned for a formal hearing in

response to DER's notice of intent to grant a permit is entitled to recover

costs and fees incurred in contesting the application, when DER denies the

application after a formal hearing? Whether DER's initial intent to grant was

substantially justified?

The parties' stipulation and the record made in the underlying permit

application, No. 87-3175, are the basis for the following

FINDINGS OF FACT

1. Dickerson Bayshore, Inc. (DBI) filed an application for a dredge and

fill permit authorizing construction of a marina on the shore of Dickerson Bay

in Wakulla County. As required by DER rule, DBI published notice that it had

applied for the permit.

2. On various grounds, DER initially issued an intent to deny DBI's

application. After DBI modified the application to meet DER's objections, DER

issued an intent to grant the permit.

3. Gulf Specimen Company, Inc. (Gulf) is a small business party, within

the meaning of Section 57.111(3)(d), Florida Statutes (1987), and the parties

have so stipulated.

4. Because petitioner Rudloe had written DER (probably on Gulf's

stationery) requesting that DER do so, DER sent petitioner a copy of its notice

of intent to grant. In the notice, DER proposed to grant DBI's application on

conditions that included installation of a "sewage pumpout facility," enforcing

prohibitions against sewage discharge and "live-aboard vessels" (later modified

to forbid only "non-transient" live-aboards) and hiring a dockmaster.

5. Petitioners' original response to DER's notice of intent to grant is

not in evidence in the present case and did not reach the Division file in Case

No. 87-3175. The amendment to notice of objection, which DER referred to the

Division of Administrative Hearings pursuant to Section 120.57(1)(3)b., Florida

Statutes (1987), alleges that Gulf and Rudloe have substantial economic

interests in the continued environmental health and productivity of the bay and

surrounding waters. Petitioner and his company collect marine animals and

plants there for scientific and educational purposes and conduct field trips for

schools; all of which provides the major source of [their] income.

6. Petitioners also alleged that "Dickerson Bay serves as one of the major

sources of marine organisms marketed by Gulf Specimen Company, as well as

providing sea water used in the tanks for cultivating marine organisms."

7. DBI filed a motion to dismiss or in the alternative for more definite

statement on August 28, 1977, addressed to petitioners' amendment to notice of

objection. On September 21, 1987, the day before this motion was denied,

petitioner filed a verified second amended petition, invoking Section

403.412(5), Florida Statutes (1987).

8. In the course of preparation for the formal hearing, DER evidently

reassessed the impact the proposed marina might have on oysters in the vicinity,

with the result that, at the time the parties filed their prehearing

stipulation, "DER again indicated an intention to deny DBR's application . . .

this time on account of the shellfish in the area." Jack J. Rudloe and Gulf

Specimen Company, Inc. vs. Dickerson Bayshore, Inc. and State of Florida,

Department of Environmental Regulation, No. 87-3175 at p. 2 (RO; April 25,

1988), adopted by final order entered June 9, 1988.

9. A week later, however, DER filed a notice of change in position stating

that it supported DBI's permit application. But, after the formal hearing, DER

adopted the recommended order's conclusion that DBI had "failed to give

reasonable assurance that the proposed marina would not violate fecal coliform

standards in Class II waters," at 53, waters ordinarily approved for shellfish

harvesting.

10. Among the findings of fact on which this legal conclusion is

predicated are the following:

In determining whether to open waters for

the harvesting of shellfish, DNR makes its

decision by identifying actual [or] potential

pollution sources that may be close enough to

shellfish harvesting waters to render them

unsafe for human consumption; number two, the

hydrographics of the area, to determine the

distribution and transport of those pollution

sources; and then the sampling program. (T. 549)

Of course, sampling could not be determinative if the pollution source were

potential, instead of actual. Before a marina opens, the precise amounts of

pollutants it will add to the water are, to some extent, a matter of conjecture.

11. Planned restrooms and pumpout facility notwithstanding, uncertainty

exists in the present case, as well. (T. 807) "Transient" live aboards are

contemplated. The harbor master is to require boats capable of discharging

their heads to lock through hull discharge valves. (Evidence at hearing

dispelled ambiguity in the language proposed as a permit condition: boats are

not to be barred from the marina just because their heads can be made to

discharge to surrounding waters.) But the harbor master will not be present

around the clock, to ensure that boaters leave their boats on stormy nights for

the public restrooms, or be able to guarantee that the heads stay locked.

12. The ameliorative influence of restrooms and pumpout facility is also

problematic. As Mr. Crum observed, [I]t is going to be a lot of problems, it's

not going to be that you are going to put a dockmaster there or a harbor master

and have this thing converted overnight, because these people have been doing it

all their lives (T. 238) Some boat owners would undoubtedly choose to remain at

the municipal dock free of charge, rather than rent a slip at a new marina. The

plan is that the harbor master would help bring order at the municipal dock,

too, by enforcing ordinances, not yet adopted. But it is not clear how well

this would work.

13. The fecal coliform standard DER water quality rules lay down for Class

II waters is precisely the same standard DNR applies in approving waters for

shellfish harvesting. In evaluating DBI's application, both DER and DNR must

assess the risk of contamination in Class II waters now approved for shellfish

harvesting. Foreseeable conditions, if the marina is built, include increased

fecal coliform loading 1700 feet away in waters where high background levels

have persisted for years.

14. Other issues litigated at the formal hearing included whether

petroleum, bottom paint, and other refuse would lead to violations of DER's

biological integrity, cadmium, copper or dissolved oxygen standards, and whether

the project was contrary to the public interest because of likely effects on

turtles and wood storks.

15. In taking its last position before the hearing began, DER presumably

made the judgment that restrooms, a pumpout facility, and a rule that

heads be locked when boats were docked provided reasonable assurance that the

marina would not contribute fecal coliform, at least in amounts which, when

added to ambient levels, would violate standards outside an area "reasonably

contiguous" to the marina. At the time DER furnished Gulf a copy of its first

notice of intent to grant, however, DER had also proposed a ban on all live-

aboards.

16. At hearing, Mr. Rudloe proved that he made recreational, as well as

commercial use of the waters of Dickerson Bay. Pertinent findings of fact in

the recommended order include:

Petitioner Jack Rudloe and his wife, Dr. Ann

I. M. Rudloe, live on Dickerson Bay, north of

the site proposed for the marina. The Rudloes

use the bay for recreation. In the laboratory

that they and the corporate petitioner operate,

tanks house specimens of marina life, many

ultimately bound for use in research on such

questions as the toxicity of oil drilling muds.

Pollution in Dickerson Bay might contaminate the

water in petitioners' uptake lines and holding

tanks; they have found no practical way to filter

the bay water. Even if petitioners' specimens

survived contamination, the effects of contamination

could render mysid shrimp and other organisms

useless for the experimental purposes for which

petitioners sell them. A good fraction of the

specimens come from Dickerson Bay, to begin with.

17. Gulf's interest in the disposition of DBI's application differed in

kind and degree from the interest of members of the public generally.

18. Gulf and the individual petitioner jointly incurred attorney's fees in

excess of $15,000. The evidence did now show whether petitioner Rudloe, as an

individual, qualified as a small business party. No appeal was taken from DER's

order in Case No. 87-3175.

CONCLUSIONS OF LAW

19. In accordance with Sections 57.111 and 120.57(1), Florida Statutes

(1987) and Rule 22I-6.035, Florida Administrative Code, the Division of

Administrative Hearings has jurisdiction of proceedings like these initiated

pursuant to the Florida Equal Access to Justice Act. Section 57.111(4)(b)1.,

Florida Statutes. The petition was filed on July 12, 1988, well within 60 days

of entry of DER's final order on June 9, 1988. Section 57.111(4)(b)2., Florida

Statutes (1987); Rule 22I-6.035, Florida Administrative Code.

20. Gulf cannot prevail unless it can establish that it qualifies as a

"prevailing small business party . . . [in a] proceeding pursuant to Chapter 120

initiated by a state agency." Section 57.111(4)(a), Florida Statutes (1987).

In appropriate cases, agencies must bear a small business party's cost and fees,

up to a maximum of $15,000, unless the agency can demonstrate that "the actions

of the agency were substantially justified or special circumstances exist which

would make the award unjust." Section 57.111(4)(a), Florida Statutes (1987).

The agency has the burden to show substantial justification or special

circumstances. Anthony Gentele, O.D. vs. Department of Professional

Regulation, Board of Optometry, No. 85-3857F (DOAH; June 20, 1986) aff'd 513

So.2d 672 (Fla. 1st DCA 1987)

Initiated By A State Agency

21. Although DER took no action before DBI filed its application for

permit, the statute defines "initiated by a state agency" to include situations

in which an agency is required by law or rule to advise a small business party

of a clear point of entry after some recognizable event in the investigatory or

other free-form proceeding of the agency.

Section 57.111(3)(b), Florida Statutes (1987)

22. DER's issuance of its intent to deny was a "recognizable event in the

investigatory or other free-form proceeding of the agency," Section

57.111(3)(b), Florida Statutes (1987), after which DER advised Gulf, a small

business party, of "a clear point of entry." Section 57.111(3)(b), Florida

Statutes (1987).

23. DER contends that the proceeding in which Gulf prevailed was not

"initiated by a state agency," Section 57.111(4)(a), Florida Statutes (1987),

because DER was not required by law to advise Gulf of a clear point of entry.

DER asserts that the agency only furnished Gulf notice of the intent to grant

because Gulf had requested notice, in accordance with Section 120.60(3), Florida

Statutes (1987), as any member of the public might have done; and cites Booker

Creek Preservation, Inc. and Manasota 88, Inc. vs. Agrico Chemical Company and

State of Florida Department of Environmental Regulation, No. 87-3007F (DOAH;

Dec. 16, 1987), for the proposition that third party objectors, not DER, are the

initiating parties in cases like the present one.

Booker Creek Distinguished

24. In the Booker Creek case, petitioners objecting to DER's intended

issuance of a dredge and fill permit, "relied upon Sections 120.57(1) and

403.412(5)" when they filed a petition with DER initiating formal administrative

proceedings on the permit application. Because the applicant abandoned the

application before hearing, and did so without the objectors' having obtained a

favorable judgment, order or settlement, petitioners were held not to be

"prevailing small business part[ies]."

25. An alternative basis for decision in the Booker Creek case was that

the objecting "Petitioners 'initiated' Case Number 86-3618 [the underlying

substantial interest case]," at page 7, not the agency. Section 403.412(5),

Florida Statutes (1987) allows participation in certain permitting proceedings

even by parties who cannot demonstrate that issuance of the permit would affect

their substantial interests. DER quotes the following from the final order in

Case No. 87-3007F:

The fact that Petitioners availed themselves

of the point of entry which is open to members

of the public through Rule 17-103.155(1)(a)

who claim that their substantial interests

may be affected by agency action, does not

transform this action into one which has

been "initiated by" the Department.

At page 5.

26. But the very next sentence articulates an essential premise for the

conclusion quoted: "Petitioners [in the Booker Creek case] were entitled to no

more specific notice of the Department's intended action than the public at

large . . . ." At page 5. Since the petitioners in the Booker Creek case never

demonstrated any substantial interest different from the interests of "the

public at large," they never showed that DER was "required by law . . . to

advise [them] . . . of a clear point of entry." Section 57.111(3)(b), Florida

Statutes (1987).

Entitled To A Point Of Entry

27. In the present case, petitioners Gulf and Rudloe pleaded and proved

special, substantial interests differing from those of the public at large. A

party whose substantial interests are to be determined by agency action has a

legal right to participate in formal adjudicatory proceedings before action is

taken, when material facts are disputed. In the matter of Surface Water

Management Permit No. 50-01420-S, 515 So.2d 1288 (Fla. 4th DCA 1987); NME

Hospitals, Inc. vs. Department of Health and Rehabilitative Services, 490 So.2d

1300 (Fla. 1st DCA 1986) (on reh.); Capeletti Brothers vs. Department of

Transportation, 362 So.2d 346 (Fla. 1st DCA 1978); Gadsden State Bank vs. Lewis,

348 So.2d 343 (Fla. 1st DCA 1977). The record shows that Gulf was entitled to

"a clear point of entry," and that DER made one available.

28. If DER had furnished a copy of its notice of intent to grant to a

member of the public who had no substantial interest in the grant of the

proposed permit, this circumstance would not have transformed the recipient into

a party entitled to a clear point of entry into the proceeding. But these

petitioners proved more than that they received a copy of the notice of intent

to grant. They also established their substantial interests in the permitting

decision. Gulf demonstrated that DER was "required by law . . . to advise [it]

. . . of a clear point of entry after," Section 57.111(3)(b), Florida Statutes

(1987) the notice of intent to grant issued.

29. An interpretation of Section 57.111(3)(b), Florida Statutes (1987)

that allowed an award of attorney's fees to a small business whose permit

application a state agency proposed to deny unjustifiably, but which did not

allow an award to a small business whose legal rights were threatened when an

agency proposed to grant a permit to another unjustifiably might incline

agencies to grant permits in doubtful cases. The Florida Equal Access to

Justice Act evinces no such skewed purpose. The Act authorizes awards of fees

and costs to deter "unreasonable government actions," Section 57.111(2), Florida

Statutes (1987), and to "diminish the deterrent effect of seeking review of, or

defending against, governmental action by providing in certain situations an

award of attorney's fees and costs against the state," id., whether the

unreasonable governmental action is the grant or the denial of a permit

application.

Prevailing Party

30. Gulf is a prevailing small business party within the meaning of

Section 57.111(3)(c)1., Florida Statutes (1987). DER's final order denied DBI's

application, and time for seeking judicial review has expired. Although Gulf

did not prevail on every issue litigated, it obtained a favorable result. This

is not a case where a party prevailed on one, but not all, of multiple counts

litigated in a single proceeding. Cf. Assad vs. Department of Professional

Regulation, No. 86-4720F (DOAH; June 12, 1987); Anthony Gentele, O.D. vs.

Department of Professional Regulation, Board of Optometry, No. 85-3857F (DOAH;

June 20, 1986) aff'd 513 So.2d 672 (Fla. 1st DCA 1987); Annette J. Ruffin vs.

Department of Professional Regulation, Division of Real Estate, No. 85-4465F

(DOAH; Feb. 7, 1986).

31. DER argues that it should never be liable in cases like these because

it is the applicant, not the agency, who has the burden of proof. See Florida

Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA

1981). While DER's success as a litigant can insulate it from fees and costs,

an applicant's failure to carry its burden can never justify assessing fees and

costs against DER, when DER shows that its action in proposing to grant or deny

a permit, action it takes before a hearing is even requested, was reasonable.

Substantial Justification

32. DER is more than a "nominal party," Section 57.111(4)(d)(1), Florida

Statutes (1987) in proceedings like these where it has both the initial

responsibility to assess and the final authority to act on applications for

environmental permits. But DER is not liable for attorney's fees and costs if

its actions were substantially justified. Section 57.111(4)(a), Florida Statutes

(1987). If a proceeding "had a reasonable basis in law and fact at the time it

was initiated," Section 57.111(3)(e), Florida Statutes (1987), the Florida Equal

Access to Justice Act does not relieve even prevailing small business parties of

paying their own attorney's fees and costs. The Act is designed to discourage

unreasonable governmental action, not to paralyze agencies doing the necessary

and beneficial work of government.

33. While the fact that Gulf did not prevail on every issue litigated in

Case No. 87-3175 does not compromise its status as a prevailing small business

party, it does point up the complexity of the questions DER had to address

before issuing its initial notice of intent to grant. Nothing in the record

supports the view that the original intent to grant was irrational or

unconsidered. After all, DER initially denied DBI's application, only reversing

itself after numerous modifications had been made. As far as the record

shows, DER staff were unfamiliar with dye tracer studies when the initial intent

to grant issued, and they did not, in any event, ignore the questions of

dispersion and dilution. Indeed, at the time the initial intent to grant

issued, DER proposed to forbid living aboard vessels at the marina altogether.

Assuming DER has the burden to "affirmatively raise and prove," Gentele vs.

Department of Professional Regulation, No. 85-3857F (DOAH; June 20, 1986) at p.

20, that the original notice of intent was substantially justified, contra

Ruffin vs. Department of Professional Regulation, No. 85-4465F (DOAH; Feb. 7,

1986); see Nutt vs. Department of Professional Regulation, No. 85-3499F (DOAH;

January 28, 1986) ("Petitioner . . . [has] burden of establishing that

governmental action has been unreasonable." At p. 6), DER has successfully

carried its burden here. See Nutt, pp. 6, 8; Rodney G. Green and Charter

Realty, Inc. vs. Department of Professional Regulation, Division of Real Estate,

No. 85-3501F (DOAH; Dec. 5, 1985).

It is, accordingly,

ORDERED:

Petitioners' motion for fees and costs is denied.

DONE and ENTERED this 8th day of November, 1988, in Tallahassee, Florida.

___________________________________

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 8th day of November, 1988.

COPIES FURNISHED:

Charles A. McMurry, Esquire

1363 East Lafayette Street

Suite C

Tallahassee, FL 32301

Carol A. Forthman

2600 Blair Stone Road

Tallahassee, FL 32399-2400

Dale Twachtmann, Secretary

Department of Environmental

Regulation

Twin Towers Office Building

2600 Blair Stone Road

Tallahassee, FL 32399-2400

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL

REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE

GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE

COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE

DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING

FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR

WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY

RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE

ORDER TO BE REVIEWED.