96-004663RP The Environmental Trust vs. Department Of Environmental Protection Status: Closed DOAH Final Order on Monday, September 8, 1997.

Summary: Proposed Rules invalid for having improper retroactive effect. Since statutory mandate expired 12/31/96, rules are otherwise moot.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE ENVIRONMENTAL TRUST, )

)

Petitioner, )

)

vs. ) CASE NO. 96-4663RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

______________________________)

SIRROM RESOURCE FUNDING, L.P.,)

)

Petitioner, )

)

vs. ) CASE NO. 96-4664RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

______________________________)

SOUTHEAST SOLUTIONS, INC., )

)

Pe titioner, )

)

vs. ) CASE NO. 96-4665RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

______________________________)

ENVIRONMENTAL CORPORATION OF )

AMERICA, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 96-4666RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

______________________________)

SIRROM ENVIRONMENTAL FUNDING, )

LLC, )

)

Petitioner, )

)

vs. ) CASE NO. 96-4836RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

______________________________)

RESERVOIR CAPITAL CORPORATION,)

)

Petitioner, )

)

vs. ) CASE NO. 96-4929RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

______________________________)

FINAL ORDER

This matter comes before the undersigned on Petitioners’

Motion for Final Order. The Administrative Law Judge has entered

two orders in this case, on November 7, 1996 and December 16,

1996, finding, in essence, that as a matter of law, the

retroactive application of the review criteria contained in the

proposed rules is improper and that there is no practical

circumstance for the proposed rules to have prospective effect,

since the program to which they relate and the statutory

authority under which they are proposed expired on December 31,

1996. Accordingly, based upon the reasoning asserted in those

two orders, upon the allegations in the subject motion and in

consideration of the points advanced in the response to the

motion and in the Motion for Redetermination and responses to

that motion, already ruled upon in this proceeding, it is obvious

that the proposed rules at issue in this proceeding have, for all

practical purposes, been declared invalid. Moreover, they are

now moot.

The Petitioners also seek a determination that the

Respondent may no longer rely upon the unpromulgated agency

statements or policies which were previously determined to be

unpromulgated rules in the Final Order entered in Case No. 95-

4606, et seq ., because the proposed rules at issue in this

proceeding, which represent the agency’s attempt at a

codification of those unpromulgated policy statements, have now

been declared invalid. While the undersigned is certainly aware

of the ramifications of the Petitioners’ arguments that the

agency may no longer rely upon the unpromulgated statements,

especially in view of the fact that the existing rule apparently

treats the same subject matter, the undersigned has no authority

to actually render such an advisory opinion or declaratory

statement, for the reasons asserted in the Department’s response

to the motion. Rather, such a determination is for another

proceeding at another time. However, the parties’ attention is

invited to Sections 120.56(4)(d) and 120.56(4)(e), Florida

Statutes, which became effective October 1, 1996, which address

the manner in which an agency shall be permitted to continue to

rely upon an unpromulgated statement as a basis for agency

action. It would seem that the scope of this statutory authority

concerning the agency’s reliance upon unpromulgated statements

might be bounded by the extent of the authority of the existing

rule on the subject matter, referenced in the undersigned’s

earlier order.

Be that as it may, the issues pertaining to the validity of

the proposed rules themselves are all that are pending before the

undersigned in this proceeding. Those issues have now been

decided, save for the related question of the Petitioners’

entitlement to attorney’s fees for this proceeding. Accordingly,

having considered the motion and responses thereto, the previous

orders and related arguments of the parties, it is, therefore

ORDERED that the proposed amendments to Rule 62-773, Florida

Administrative Code, are hereby declared to be invalid.

Jurisdiction is reserved for a determination of the Petitioners’

entitlement to, and amount of, attorney’s fees and costs. The

parties shall, within seven days of the date hereof, provide the

undersigned with suggested hearing dates concerning the matter of

attorney’s fees and costs.

DONE AND ORDERED this 12th day of February, 1997, in

Tallahassee, Florida.

___________________________________

P. MICHAEL RUFF

Administrative Law Judge

Divisi on of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 12t h day of February, 1997.

COPIES FURNISHED:

Virginia B. Wetherell, Secretary

Department of Environmental Protection

3900 Commonwealth Boulevard

Tallahassee, Florida 32399-3000

Perry Odom, General Counsel

Department of Environmental Protection

3900 Commonwealth Boulevard

Tallahassee, Florida 32399-3000

Rebecca Grace, Esquire

Department of Environmental Protection

3900 Commonwealth Boulevard, MS 35

Tallahassee, Florida 32399-3000

Matt Mathews, Esquire

Robert C. Downie, II, Esquire

MATHEWS & DOWNIE, P.A.

Post Office box 10036

Tallahassee, Florida 32301

E. Gary Early, Esquire

AKERMAN, SENTERFITT & EIDSON, P.A.

Post Office Box 10555

Tallahassee, Florida 32302-2555

Thomas K. Maurer, Esquire

FOLEY & LARDNER

111 North Orange Avenue, Suite 1800

Orlando, Florida 32801

Donna E. Blanton, Esquire

Robert M. Rhodes, Esquire

STEEL, HECTOR & DAVIS

215 South Monroe Street, Suite 601

Tallahassee, Florida 32301

Carter B. McCain, Esquire

MACFARLANE, FERGUSON & MCMULLEN

Post Office Box 1531

Tampa, Florida 33601

Ralph A. DeMeo, Esquire

Michael P. Petrovich, Esquire

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 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.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE ENVIRONMENTAL TRUST, )

)

Petitioner, )

)

vs. ) Case No. 96-4663RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

_________________________________)

SIRROM RESOURCE FUNDING, L.P., )

)

Petitioner, )

)

vs. ) Case No. 96-4664RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

_________________________________)

SOUTHEAST SOLUTIONS, INC., )

)

Petitioner, )

)

vs. ) Case No. 96-4665RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

_________________________________)

ENVIRONMENTAL CORPORATION )

OF AMERICA, INC., )

)

Petitioner, )

)

vs. ) Case No. 96-4666RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

_________________________________)

SIRROM ENVIRONMENTAL )

FUNDING, LLC, )

)

Petitioner, )

)

vs. ) Case No. 96-4836RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

_________________________________)

RESERVOIR CAPITAL CORPORATION, )

)

Petitioner, )

)

vs. ) Case No. 96-4929RP

)

DEPARTMENT OF ENVIRONMENTAL )

PROTECTION, )

)

Respondent. )

_________________________________)

FINAL ORDER

Pursuant to notice this cause came on for formal hearing

before P. Michael Ruff, duly designated Administrative Law Judge,

on March 11, 1997, in Tallahassee, Florida. The appearances were

as follows:

APPEARANCES

For Petitioner Southeast Solutions, Inc.:

Matt Mathews, Esquire

Matt Mathews, P.A.

418 East Virginia Street

Post Office Box 10036

Tallahassee, Florida 32301

For Respondent The Environmental Trust:

E. Gary Early, Esquire

Akerman, Senterfitt & Eidson, P.A.

Post Office Box 10555

Tallahassee, Florida 32302-2555

For Petitioner Environmental Corporation of America, Inc.:

Donna E. Blanton, Esquire

Steel, Hector and Davis, LLP

215 South Monroe Street, Suite 601

Tallahassee, Florida 32301

For Petitioner Sirrom Resource Funding, LLP.:

Thomas K. Maurer, Esquire

Foley and Lardner

111 North Orange Avenue, Suite 1800

Orlando, Florida 32801

For Respondent Department of Environmental Protection:

Rebecca Grace, Esquire

Douglas Building, MailStation 35

3900 Commonwealth Boulevard

Tallahassee, Florida 32399-3000

STATEMENT OF THE ISSUE

The issues to be resolved in this proceeding concern whether

the Petitioners are entitled to an award of attorneys' fees and

costs for the underlying rule challenge proceeding and for

seeking recovery of such attorneys' fees and costs. The amount

of attorney's fees and costs to be awarded if entitlement is

proved must also be determined.

PRELIMINARY STATEMENT

This is an attorneys’ fee proceeding in which the

Petitioners are requesting attorneys’ fees and costs related to

their successful challenge of a proposed rule of the Florida

Department of Environmental Protection (DEP). A Final Order was

entered in that proceeding on February 12, 1997, declaring the

proposed rule invalid. A hearing was conducted in this

proceeding on March 11, 1997, on the issue of entitlement to

attorneys’ fees and costs which embodied the issue of whether the

actions of the agency in proposing the rule amendments were

substantially justified and whether special circumstances existed

which would make an award of attorneys’ fees and costs unjust.

The hearing thereafter scheduled for March 17, 1997, to

determine the amount of attorneys’ fees and costs if such an

award were made, was cancelled because the parties stipulated to

hourly rates, fees and costs and no factual issues then remained

for adjudication. (See stipulation filed March 13 and 14, 1997,

Motion filed March 17, 1997, and Order issued March 17, 1997.)

Upon presentation of testimony and argument in the March 11, 1997

hearing, that proceeding was concluded a transcript thereof was

requested and filed and in due course the parties timely filed

proposed final orders, which have been considered in the

rendition of this final order.

FINDINGS OF FACT

1. The Department published in the Florida Administrative

Weekly a Notice of Rule Development for Rule 62-773, Florida

Administrative Code, on March 22, 1996. The Department

thereafter published a Notice of Workshop concerning the Rule in

the June 7, 1996 issue of the Florida Administrative Weekly

(FAW). It thereafter published a Notice of Proposed Rule-Making

pursuant to Section 120.54(1), Florida Statutes (1995), in the

FAW September 27, 1996, issue. The publication of that Notice

began the point of entry time or "window" in which persons or

parties aggrieved by the proposed rules could challenge them by

filing petitions in opposition.

2. The Petitioners herein filed Petitions for Hearing

challenging the proposed rule pursuant to Section 120.56(2),

Florida Statutes, between October 1 and October 18, 1997. On

November 7, 1996, pursuant to a Motion for Partial Summary Final

Order, the undersigned entered an order declaring a portion of

the proposed rule to be an invalid exercise of delegated

legislative authority. On February 12, 1997, the final order was

entered declaring the proposed amendments to 62-773, Florida

Administrative Code, invalid and moot.

3. Pursuant to the Petitioner's request for attorney's

fees and costs, a hearing was held March 11, 1997, concerning

whether the Petitioners are entitled to attorneys’ fees and costs

pursuant to Section 120.595(2) Florida Statutes, which took

effect October 1, 1996. The Department has requested dismissal

of that fee request, arguing that Section 120.595(2) is a

substantive provision and cannot be retroactively applied in a

case in which all the rule-making notices were filed prior to the

effective date of that new attorneys’ fee provision. The

Department's position is that the operative facts were

established, rights were vested, and the cause of action

concerning the rules accrued upon the date that the proposed

rules were noticed September 27, 1996. The Department also

presented factual evidence to show that its actions in proposing

the rule amendments were substantially justified and/or that

special circumstances existed which would make the award of

attorneys’ fees and costs unjust.

4. The filing of the Department's Notice of Proposed Rule

(NPR) differs significantly from most cases such as auto accident

cases or contract cases in which accrual of a cause of action is

based upon a clearly defined, unchangeable event (the time and

date an auto accident occurred, for example, or the date of

execution of a contract). In the case of a challenge to a

proposed rule, the agency's unilateral and discretionary

authority to modify withdraw or otherwise dispense with the

necessity of the filing of an action is not restricted until rule

adoption. Section 120.54(3)(d)2, Florida Statutes (Supp. 1996),

states: "after the notice required by paragraph (a) and prior to

adoption, the agency may withdraw the rule in whole or in part."

Until adoption, the rule-making process remains transitory and

proceeds solely at the discretion of the agency to keep, modify

or withdraw the proposed rule. The rights of the parties did not

become fixed until a petition was filed with the Division of

Administrative Hearings. Only at that time did the Department

lose its unfettered, discretionary authority to cure the

illegality of its proposed rule or withdraw it. Section

120.569(2)(a), Florida Statutes (Supp. 1996). (Upon filing of a

Petition with the Division of Administrative Hearings, "the

agency shall take no further action with respect to the formal

proceeding, except as a party litigant, . . . .")

5. As applied to this case, the Department had complete

discretion to withdraw the proposed rule. Given the Department's

unilateral authority to cure the illegality of its proposed rules

without the necessity of any party having to file a challenge,

the Petitioners’ cause of action accrued no earlier than the date

the Petitioners filed their Petitions. All Petitioners filed

their petitions on or after October 1, 1996. Therefore, this

cause of action must have accrued after October 1, 1996, and must

be a "proceeding" for which attorneys’ fees will lie pursuant to

Section 120.595(2), Florida Statutes (1996). The twenty-one (21)

day point of entry window in which the Petitioners could

challenge a proposed rule began on September 28 and extended

forward beyond October 1. Therefore, there could be no

proceeding to which the attorneys’ fees statute referenced could

apply until the petitions were filed and the time for filing

those petitions extended into the time period after which the new

statute concerning attorneys’ fees took effect. If the

Petitioners had never filed petitions challenging the proposed

rules, the proposed rules would have automatically taken effect

by operation of law and no dispute, controversy, or "cause of

action" would ever have arisen.

Substantial Justification

6. By Final Order dated February 12, 1997, the proposed

amendments to Rule 62-773, Florida Administrative Code, which

were published in the September 27, 1996, Florida Administrative

Weekly (NPR), were declared invalid. The Final Order found as a

matter of law that the retroactive application of the review

criteria contained in the proposed rule is illegal and beyond the

Department's delegated legislative authority.

7. Under Section 120.595(2), Florida Statutes (Supp.

1996), the Petitioners are entitled to an award of reasonable

attorneys’ fees and costs unless the Department can demonstrate

that its actions on the proposed rule-making were substantially

justified, or that special circumstances exist. No credible

evidence was presented to show the existence of special

circumstances.

8. The Department has admitted that all the activities of

the parties regulated by the proposed rule (ie. clean up-work and

preparation and filing of reimbursement applications) occurred

prior to the time the proposed rule could have been adopted, and

therefore the proposed rule cannot have any prospective effect on

the actions of regulated parties. Mr. Williams, for the

Department, testified that, if prospective, the proposed rule

"would have no effect."

9. However, the process for the Department's review of

reimbursement applications would have been controlled by the

proposed rule if it had been adopted. The Department's witnesses

testified that it processes applications using the standards

contained in the invalidated proposed rule, regardless of whether

it adopted the proposed rule. This raises the question as to

whether there is any rational reason for seeking to adopt it.

10. The Department's "action" which must be substantially

justified is its attempt to adopt the proposed rule. Given that

the proposed rule cannot have any effect at all unless it is

applied retroactively, the Department must provide substantial

justification for proceeding with a retroactive rule. The

Department did not identify any statutory provision that

authorized adoption of retroactive rules.

11. John Ruddell, Director of the Division of Waste

Management, testified that there were two justifications for

adopting the proposed rule. First, the Department intended to

clarify the intent of the statute, and second, it recognized

that, as non-rule policy, the proposed rule needed to be adopted

as a rule. Charles Williams, Administrator of the Reimbursement

Section testified that the Department had committed to the

Administrative Law Judge in a prior administrative proceeding

that it would expeditiously proceed with this rule-making in

order to establish a defense to the application of unadopted

rules pursuant to Section 120.535, Florida Statutes (1995). The

basis for rule-making identified by Mr. Williams is consistent

with that expressed by the Department at the rule development

workshop held on July 8, 1996. The transcript for the rule

development hearing was filed at the March 11, 1997 attorneys’

fee hearing in this case. No other purpose was expressed at the

workshop. The Final Order in that case, in which the non-rule

policies were found to be rules, was admitted into evidence in

this case without objection. Going forward with the rule-making

to defend a law suit after the relevant program implemented by

the proposed rule was terminated by statute (effective

December 31, 1996) does not establish a legal basis for the

retroactive application of a substantive rule.

12. The Department's witness testimony explaining these

justifications contains no justification for a "clarifying" rule

that will not inform anyone about future actions. There is no

one to benefit from a clarification. The reimbursement

applicants who have already performed work and submitted

applications cannot go back in time and conform their activities

to those "clarified" interpretations of the statute.

13. The Department's witnesses contradicted each other on

whether the proposed rule was needed. Mr. Ruddell testified that

the proposed rule formalized non-rule policy that needed to be

adopted as a rule. Mr. Williams testified, on the other hand,

that there was no need to adopt the proposed rule. He felt that

the proposed rule merely "clarified" the existing statute and

that the standards were apparent from that existing statute. His

testimony was in conflict with the Administrative Law Judge's

finding in the prior proceeding that the standards constituted

unadopted rules in and of themselves. His testimony is further

called into question by his testimony that he considers all of

the rules in Chapter 62-773, Florida Administrative Code, to be

nothing more than a "clarification" of Chapter 376, Florida

Statutes. Even more confusing is that both witnesses testified

that the Department's reimbursement application review process

would not be any different before or after adoption of the

proposed rule.

14. Given that the only possible effect the proposed rule

could have had, if it were adopted, is during the reimbursement

application review process (even though the evidence presented

was that the review process would be unaffected), the only

practical effect would be to substantially alter the burden on a

reimbursement applicant who challenges a department reimbursement

decision. Adoption of the proposed rule would elevate the basis

for the Department's decision on a reimbursement application from

incipient policy analyzed on a case-by-case basis to that of a

duly adopted rule.

15. Not only would such an after-the-fact change in

standards impermissibly violate vested rights but it would be

inconsistent with the existing rule on the same subject which

expressly requires reimbursement applications to be reviewed in

accordance with the laws, rules and guidelines in effect at the

time the work was done. Rule 62-773.100(5), Florida

Administrative Code.

16. Based upon the evidence produced at hearing, the

Department failed to do an analysis of the practical and legal

consequences of its actions. There was evidence that guidance

was sought from the Office of General Counsel. However, neither

witness could comment on the scope of the inquiry. Given the

complete lack of credible legal authority that would allow the

expressly retroactive application of substantive standards, the

levels of inquiry could not have been complete. In addition,

despite the fact that the Department's proposed rule defines

financial and economic terms, the Department's staff economist

was not consulted. Finally, the Department appears to have

ignored the extensive public comments filed during the rule

development process prior to publication of the NPR. It was not

reasonable for the Department to fail to realize the futility of

a prospective proposed rule, when the statutory program was

imminently expiring and the obvious illegality of a retroactive

proposed rule.

17. Inconsistent and illogical testimony by Department

witnesses regarding the Department's other reasons for going

forward with this rule-making demonstrate a lack of consideration

of whether there was any practical reason whatever to adopt the

rule and whether there was any identifiable statutory authority

to adopt a retroactively effective rule. Consequently, the

evidence presented by the Department does not demonstrate a sound

basis in a law or fact for adopting the proposed rule. In fact,

the most credible interpretation of the Department's conduct and

the evidence presented is that it affirmatively sought to

retroactively impose elevated legal standards on regulated

parties. Even if this is not the intended result, it is the

indisputable effect of adopting the proposed rule. The

Department should have known that it would be impermissible to

retroactively convert policy into rule, thereby changing the

legal standards applicable to any challenge to the Department's

actions on the reimbursement applications.

Scope of the Proceeding

18. The Petitioners, in addition to the invalidation of

the proposed rule, sought an order prohibiting the Department

from relying on a non-rule policy if the proposed rule was

invalidated, the policy being what was putatively codified in the

proposed rule. That request by the Petitioners, they maintain

was a logical outgrowth of the invalidation of the proposed

rules. Therefore, they maintain that the briefing and argument

on that issue is beneficial to the proper resolution of this

proceeding and that the time spent developing arguments

concerning why the Department could not rely on the non-rule

policy, if the proposed rule was invalidated, should be included

in this proceeding for purposes of calculating attorneys’ fees

and costs.

19. After invalidation of the proposed rule, the

Petitioners sought attorneys’ fees by motion or petition.

Substantial work was performed to demonstrate entitlement to

their fees and costs, to document the fees and costs, to

negotiate stipulations with the Department, to prepare for and

attend hearing on the substantial justification issue, and to

prepare proposed final orders. The reasonable costs and

attorneys’ fees expended by the Petitioners directly related to

this proposed rule, from the filing of the Petitions through the

issuance of the Final Order, are part of this proceeding for

purposes of awarding attorneys’ fees and costs. It is found that

the Petitioners have submitted sufficient records of costs and

fees which I have reviewed for the part of this proceeding not

covered by the stipulations.

20. The Petitioners also seek attorneys’ fees associated

with their participation in the rule-making process prior to the

Department's submission of the Notice of Proposed Rule Making to

the Department of State on September 18, 1997, which was

published in the September 27, 1996, issue of the FAW.

21. The time spent on the rule-making issues before the

filing of the Notice of Proposed Rule Making and the amounts of

money relating thereto, attributable to such proposed attorneys’

fees, are depicted on pages 12, 13, and 14 of the Department's

Proposed Final Order. The attorneys’ fees the Petitioners seek

for time spent in arguing the question of the Department's legal

authority to rely upon the agency’s statements upon which the

proposed rule is based after the rule was invalidated, and the

amounts related thereto, are depicted on pages 14, 15, and 16 of

the Department's Proposed Final Order. These figures are adopted

herein as the correct times and amounts for purposes of those

proposed categories of attorneys’ fees.

Single $15,000 Fee Cap

22. The Department argues that the $15,000 limitation

contained in Section 120.595(2), Florida Statutes (1996), is an

amount to be divided among all Petitioners to the proposed rules

challenge. Five law firms representing six Petitioners

challenged the proposed rules. All Petitioners, except for

Reservoir Capital Corporation (hereinafter Reservoir), applied

for attorneys’ fees and costs; however, Reservoir's attorneys

have participated in all of the telephone hearings and conferred

with other attorneys in the case. Well over 400 hours have been

billed by the attorneys in the aggregate; some of which time was

billed for conferring and sending draft copies of documents to

each other.

23. The petitions filed herein were filed separately.

Each party made independent factual allegations and alleged

separate reasons to demonstrate how the substantial interests

have been affected. Each proceeding was assigned a separate case

number by the Division of Administrative Hearings. The cases

were thereafter consolidated for hearing.

CONCLUSIONS OF LAW

Applicability of Section 120.595(2),

Florida Statutes (Supp. 1996).

24. Section 120.595(2), Florida Statutes (Supp. 1996),

states that:

[I]f the court or administrative law judge

declares a proposed rule or portion of a

proposed rule invalid pursuant to Section

120.56(2), 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.

25. Although the NPR was published prior to October 1,

1996, the effective date of Section 120.595, Florida Statutes

(Supp. 1996), the Department at that point of publication still

had complete unilateral authority to withdraw or modify the

proposed rule in whole or in part. If no challenges had been

filed, the rule would have proceeded to adoption by operation of

law. See Section 120.54(3)(d)2, Florida Statutes (Supp. 1996).

The freedom by the agency to unilaterally terminate the rule

proposal by withdrawal of the rule (or to modify it) and the

Petitioners’ inchoate right (at that point)to obtain a

declaration that the proposed rule was invalid shows that the

vesting or accrual of the parties' rights had not yet become

fixed at the point of publication of the NPR. See Williams

College v. Bourne , 677 So. 2d 1118 (Fla. 5th DCA 1996); Young v.

Altenhouse , 472 So. 2d 1152 (Fla. 1985).

Because the parties' rights relating to the proposed rule

challenge were not legally fixed upon publication of the NPR

since the agency was free to unilaterally withdraw, change, or

modify the proposed rule at that point, neither were the parties'

rights fixed regarding the issue of entitlement to and recovery

of attorneys’ fees and costs. The agency acted at its peril by

publishing the rules so close to the effective date of the

subject attorneys’ fee statute that the twenty-one (21) day

period for challenge to the proposed rules extended beyond that

statute’s effective date. The agency by its publication of the

proposed rule so close to the effective date of the statutory

change regarding attorneys’ fees, by its own hand set the time

period to extend beyond October 1, 1996 for the fixing or vesting

of the parties' rights by twenty-one (21) days from September 27,

1996. The subject attorney's fee statute clearly contemplates

that attorney's fees be awarded if substantially justified as a

result of a “ proceeding ” in which proposed rules are challenged.

Clearly parties are afforded a twenty-one (21) day time period in

which to initiate such a proceeding.

Such statutes which impair vested rights, create new

obligations or impose new penalties have been held to be

substantive and not remedial and as such cannot be

retrospectively applied. See State Farm Mutual Auto Insurance

Company v. LaForet , 658 So. 2nd 55 (Fla. 1995); L. Ross, Inc. v.

R. W. Roberts Construction Company , 466 So. 2d 1096 (Fla. 5 th DCA

1985). Thus, since the substantive statute enacting the

attorney's fee provision at issue cannot have retroactive

application, in order for it to apply, the crucial facts giving

rise to vested substantive rights in the Petitioners must have

occurred or become fixed or vested after the effective date of

that statute for it to operate. The court in the Ross case,

supra, held that the crucial date for the fixing of the key facts

or vested rights by which it may be determined whether a

statutory obligation is being unconstitutionally retroactively

applied is the date the particular cause of action accrued.

Speaking through Judge Cowart, the court stated:

The crucial date is the date of the accrual of the

particular cause of action. . . .because that is the

date on which the essential facts occurred and were

sealed beyond change by the surety and after that event

the legislature cannot, ex post facto constitutionally

enhance the obligation or penalty that results from

those facts. The increased obligation for attorney's

fees resulting from the statutory amendment. . . .

cannot be constitutionally applied as to causes of

action in favor of subcontractors against sureties that

were in existence on. . . . the effective date of the

statutory amendment.

26. Applying the court's reasoning to the case at hand, it

is apparent that the essential facts giving rise to the accrual

of the "cause of action" in this matter occurred after the

effective date of the subject attorney's fee statute. That is,

until the subject twenty-one (21) day window for filing petitions

in opposition to the proposed rules elapsed or petitions were

timely filed, whichever occurred first, the essential facts

giving rise to the cause of action were not "sealed beyond

change." The Department had complete unilateral authority to

withdraw the proposed rule in whole or in part anytime prior to

adoption or prior to the filing of the rule challenge petitions.

Thus, the earliest possible accrual of the parties' vested rights

was at the time the rule challenge petitions were filed within

the twenty-one (21) day point of entry period which, due to the

time the agency chose to notice the proposed rules occurred on

both sides of the statutory effective date of October 1, 1996.

Thus, the parties’ vested rights can be concluded to have accrued

only after October 1, 1996, because all the petitions were timely

filed after that date. Because the parties' rights did not

become legally fixed until after the effective date of the

attorney's fee provision, that provision is applicable in this

proceeding and does not implicate any retroactive application of

substantive law.

27. Mere publication of the purely ambulatory NPR cannot fix

the parties rights’ in this rule challenge. Given the agencys’

freedom to withdraw or amend the rule, publication of the NPR

does not provide the challengers with vested rights and cannot be

used to create vested rights for the Department to proceed under

the pre-October 1, 1996 law.

28. Accordingly, neither the parties' rights relating to the

payment and recovery of attorney's fees, nor the underlying cause

of action accrued prior to October 1, 1996. Therefore the

operative attorney's fee provision, Section 120.595(2), Florida

Statutes (Supp. 1996), is applicable to determine the award and

amount of attorney's fees in this proceeding.

Substantial Justification

29. Because the proposed rule which is the subject of this

proceeding has been declared invalid, reasonable attorneys’ fees

and costs must be awarded to the Petitioners "unless the

Department demonstrates that its actions were substantially

justified or special circumstances exist which would make the

award unjust." Section 120.595(2), Florida Statutes (Supp.

1996). This section also describes the substantially justified

standard as requiring a showing that the Department had a

reasonable basis in law and fact at the time of its action.

30. The Equal Access to Justice Act, Section 57.111, Florida

Statutes (Supp. 1996), (EAJA), contains language nearly identical

to Section 120.595(2) Florida Statutes (Supp. 1996), regarding

the “substantially justified” standard. Accordingly, EAJA cases

can be consulted for guidance. In order to demonstrate

substantial justification for its actions, the Department in this

proceeding had to present evidence that it had a "solid though

not necessarily correct basis in law and fact for the position it

took." The Department of Health and Rehabilitative Services v.

S.G. , 613 So. 2d 1380 (Fla. 1st DCA 1993).

31. Applicable law states that all reimbursable clean-up

work had to be completed prior to August 1, 1996, and all

reimbursement applications had to be submitted to the Department

on or before December 31, 1996. Section 376.3071(12), Florida

Statutes (Supp. 1996). Consequently, any activities by the

parties regulated under the proposed rule could not be affected

by its adoption. Furthermore, without specific authorization in

the statutes, the Department is not authorized to adopt a rule

with retroactive effect. Jordan v. Department of Professional

Regulation , 522 So. 2d 450-453 (Fla. 1st DCA 1988). ("An

administrative rule is operative from its effective date, and,

like a statute, is presumed to operate prospectively in the

absence of express language to the contrary.") (Citations

omitted) The Department itself has specifically recognized the

illegality of retroactively applying its rules. Port Everglades

Authority v. DER, et al , DOAH Case No. 86-0039, DER Case No. 86-

0002 (October 8, 1987). ("To apply the mitigation memo to this

application would be contrary to the general rule that

administrative regulations will not be applied

retroactively. . . . In reviewing the mitigation proposal, the

hearing officer should use the policy which was in effect at the

time the application was complete.") The Department failed to

demonstrate any express or implied authority for adopting a rule

with retroactive affect.

32. The facts revealed by the Department's witness indicate

its position that the proposed rule is not actually required.

However, the Department continued to vigorously proceed with the

rule-making process, apparently solely to justify its prior

application of unwritten, unadopted rules to reimbursement

applications. Its attempted explanation that this non-rule

policy must be adopted as a rule might be believable if there was

any possibility for it to be prospectively applied. In this

case, the only possible application of the proposed rule would be

to retroactively create higher standards for applicants

challenging the Department's determinations on reimbursement

applications.

33. Even if the Department was unable to recognize the

practical effect of its actions, it should have considered the

comments received during the rule development process, which

clearly and without deviation spelled out the impermissible

nature of adopting the proposed rule. Based on the testimony and

documentary evidence, the Department has not demonstrated

substantial justification for proceeding with the adoption of the

proposed rule because the proposed rule would have absolutely no

prospective effect and the only retroactive effect would be to

impermissibly apply new review criteria and elevate the

Petitioner's burden of proof in a proceeding challenging the

Department's reimbursement application review decisions. None of

the grounds which the Department raised at the hearing would be

relied upon by reasonable persons, particularly where the

invalidity of the rule had been clearly explained by public

comments during the rule development process. The Department has

failed to demonstrate that its actions in this case, in issuing a

proposed rule explicitly calling for a retroactive application of

substantive application review standards, were substantially

justified or that special circumstances existed that would make

the award unjust.

Time Spent in Rule Making and

in Discussing Reliance on Unpromulgated Agency Policy

34. The Petitioners have asserted that attorneys’ fees and

costs should be awarded for the time they spent in the “free-

form,” pre-proceeding, rule-making process. First, the

Petitioners did not challenge the manner in which the agency

conducted its rule-making process. No allegation was made that

proper notices or other requirements of Section 120.54 were not

met. It would be an "impermissible extension of the statutory

language" to award attorney's fees for time spent in rule-making.

Certain Lands v. City of Alachua , 518 So. 2d 386 (Fla. 1st DCA

1987) (Court would not award fees or costs for years worth of

pre-foreclosure work even though fees could be awarded for the

foreclosure proceeding itself).

35. Second, neither the statutory provision for th e award

of fees and costs nor the rule challenge provision requires

proposed rule challengers to participate in a rule-making process

in order to receive attorney's fees and costs, nor does the

statute indicate that the award of fees and costs should include

time spent participating in rule-making. Section 120.54, Florida

Statutes, governing rule-making also does not require challengers

to participate in the rule-making process. As noted above,

statutory awards of attorney's fees must be strictly construed

Pena , at 960. There is simply no language in Chapter 120, Florida

Statutes, indicating that prevailing Petitioners in a proposed

rule challenge may receive cost or attorneys’ fees expended while

participating in the separate rule-making process.

36. Th ird, the rule-making process in Section 120.54,

Florida Statutes, was established to encourage public

participation. If successful rule challenger Petitioners,

pursuant to Section 120.595(2), are allowed to re-coup attorney's

fees and costs expended in attending multiple workshops held at

multiple locations across the state, agencies would be reluctant

to voluntarily hold more than one workshop for fear of having to

pay those travel and attorney expenses. Additionally, by

awarding fees and costs incurred while participating in rule-

making as a result of a successful rule challenge, the

rule-making process will be transformed from open discussion to

pre-litigation negotiation. Such award would have a chilling

effect on the entire rule-making process.

37. The Petitioners have also requested a determination

that the Respondent may no longer rely upon the unpromulgated

agency statements or policies as referenced in the Final Order

herein at page three. Thus, for litigating and arguing that

issue, they maintain that attorneys’ fees and costs are due them

for that argument in the underlying proceeding. The Final Order

issued in this case, however, indicates that "the undersigned has

no authority to actually render such an advisory opinion or

declaratory statement . . ." and "the issues pertaining to the

validity of the proposed rules themselves are all that are

pending before the undersigned in this proceeding." Id . Not

only was an order not issued providing the relief requested by

the Petitioners concerning the agency’s continued reliance on the

unpromulgated policy, but the final order stated that the instant

case was the wrong proceeding in which to seek that relief. The

Petitioners did not prevail on that issue and could not have

prevailed on it in this proceeding since there was no

jurisdiction to grant that which they sought. Therefore, no

award of fees and costs expended pursuing that aspect of the

claims can be made.

$15,000 per Rule Challenge “Cap” Issue

38. The Department maintains that any award of attorney's

fees should be capped at $15,000 for the entire proceeding.

Section 120.595(2), Florida Statutes, governs the award of

attorney's fees for a proposed rule challenge. "If the Court or

Administrative Law Judge declares a proposed rule or a portion of

a proposed rule invalid pursuant to Section 120.56(2), a judgment

or order shall be rendered against the agency for reasonable

costs and reasonable attorney's fees. . . ." Section 120.595(2).

This section also limits the amount by stating that "no award of

attorney's fees as provided by this subsection shall exceed

$15,000." This is identical to the language limiting attorney's

fees in challenges to existing rules.

39. The case law regarding statutory fee caps is limited.

The only reported case in which a statutory fee has been

construed appears to be Schommer v Bentley , 500 So. 2d 118 (Fla.

1986). In the Schommer case, the Florida Supreme Court construed

the statutory fee limitation for court appointed attorneys

contained in Section 925.036, Florida Statutes. That section

provides that:

(1). The compensation for representation shall not

exceed the following:

(a). For misdemeanors and juveniles represented at

the trial level: $1,000.

(b). For non-capitol, non-life felonies represented at

the trial level: $2,500.00.

(c). For life felonies represented at the trial level:

$3,000.

(d). For capitol cases represented at the trial level:

$3,500.00.

(e). For representation on appeal: $2,000.00 .

In Schommer , two attorneys from the same firm participated in the

representation of a criminal defendant. The court found that if

multiple counsel was necessary for the effective representation

of the criminal defendant, compensation was allowable under the

statute up to the statutory limit for each attorney. The

situation presented in this case is analogous to that in

Schommer . Each of the parties was, due to the Department’s

attempt to promulgate a rule that was clearly and facially

illegal, required to retain counsel in order to effectively

represent and protect its interests against the Department’s

illegal action. As the attorney’s fees provisions of Chapter

120, Florida Statutes, are intended to provide some measure of

financial relief in situations in which agencies have acted

outside of their authority, the $15,000.00 attorney’s fee cap

must apply to each party requiring representation.

40. The language of the statute and the legislative history

support the fact that the $15,000 cap is to apply to each party

forced to bring a proceeding before the Division of

Administrative Hearings. Section 120.595(2), Florida Statutes,

provides that when an agency prevails in a rules challenge

proceeding, the agency is entitled to recover its costs and fees

from any party that participated for an improper purpose.

Therefore, the agency would be entitled to recovery from multiple

parties so long as no recovery exceeded $15,000 and the total

amount recovered did not exceed the actual amount expended by the

agency. Similarly, the attorney’s fee provision with regard to

an agency acting without substantial justification must be read

in the same light so as to avoid dilution of the financial

ability of a party to bring an action challenging an agency’s

illegal rule-making.

41. The wording of the statute itself indicates the

requirement that each party is entitled to an award of attorney’s

fees up to $15,000. The provision begins by stating the general

requirement that “a judgment or order” must be rendered against

the agency for both “reasonable costs” and “reasonable attorneys’

fees.” Thus, the judgment or order issued by the court or

administrative law judge must be for all reasonable costs and

attorney’s fees. The later provision in the same statute only

limits each “award” of attorney’s fees to $15,000. Accordingly,

each party to the proceeding where a proposed rule is declared

invalid is entitled to an award of attorney’s fees that does not

exceed $15,000. The judgment or order of the court or the

administrative law judge, which must be rendered for all

reasonable costs and attorney’s fees is not similarly limited.

42. A review of the Final Bill Analysis and Economic Impact

Statement for Chapter 96-159, Laws of Florida, is also supportive

of the fact that the $15,000 cap is to apply to each party forced

to bring an action to protect its substantial interest. The bill

analysis prepared by the House of Representatives Committee on

Streamlining Governmental Regulations, dated June 14, 1996,

provides that:

For challenges to proposed and existing agency rules,

the Governor’s Commission recommended that if a

proposed rule, existing rule, or portion of a rule is

declared valid, the administrative law judge shall

award reasonable costs and reasonable attorneys’ fees

to the petitioner , unless the agency demonstrates that

its actions were substantially justified or that

special circumstances exist that would make the award

unjust (emphasis supplied).

An award of attorney’s fees under these provisions

shall not exc eed $15,000. These provisions are

included in subsections (2) and (3) of Section 120.595,

Florida Statutes.

It is clear from the legislative history that, although an award

is to be made against an agency, it is correspondingly to be made

to a petitioner.

43. At least one commentator has noted that the purpose of

the attorneys’ fees amendments in Chapter 120 “reflect the

desired link between formal adoption of rules and agency

accountability to the Legislature and to the public.” M. J.

Edenfield, “Attorneys Fees and Costs,” Florida Bar Journal ,

Volume LXXI, No. 3, March 1997. Ms. Edenfield concluded by

stating that:

Although attorneys fees and costs are by no

means automatically awarded to prevailing

parties in APA proceedings, the changes

brought about by the 1996 Legislature for

award of fees and costs make for a more level

playing field between the private sector and

state agencies.

If the award of fees in multi-party litigation is diluted and

restricted in cases where an agency is found to have acted

without substantial justification, the Legislature’s intent to

level the playing field and allow for effective participation by

the private sector will have been thwarted.

For the foregoing reasons, it is concluded that the fee

limitation contained in Section 120.595(2), Florida Statutes

(1996 Supp), applies to each proceeding filed by each petitioner

with the Division of Administrative Hearings challenging the

Department’s proposed rule amendment. Therefore, the parties to

these consolidated proceedings are each entitled to an award of

their attorneys’ fees and costs up to the statutory $15,000

limit.

In consideration of the foregoing, it is concluded that the

Department shall reimburse each Petitioner for their reasonable

attorneys’ fees and costs incurred in the underlying rule

challenge proceeding, and in demonstrating entitlement to

attorneys’ fees and costs incurred in seeking recovery of

attorneys’ fees and costs for the time period beginning with the

preparation and filing of the Petitioners’ petitions, through the

issuance of this Final Order. It is, therefore,

ORDERED that the Department shall pay attorneys’ fees and

costs to the Petitioners in this proceeding as follows (excludes

time spent in rule-making and on policy issue):

1. Reservoir Capital Corporation: no attorneys’ fees and no

costs.

2. Environmental Corporation of America, Inc.: $15,000 for

attorneys’ fees and $464.93 in costs;

3. The Environmental Trust: $8,844 for attorneys’ fees and

$81.40 in costs;

4. Sirrom Resource Funding, L. P., and Sirrom Environmental

Funding LLC jointly: $12,789 in attorneys’ fees and

$250.00 in costs; and

5. Southeast Solutions, Inc.,: $14,220.00 for attorneys’

fees and $212.00 in costs.

DONE AND ORDERED this 8th day of September, 1997, at

Tallahassee, Leon County, Florida.

___________________________________

P. MICHAEL RUFF

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax FILING [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 8th day of September, 1997.

COPIES FURNISHED:

Rebecca Grace, Esquire

Department of Environmental Protection

3900 Commonwealth Boulevard, MailStation 35

Tallahassee, Florida 32399-3000

Matt Mathews, Esquire

Robert C. Downie, II, Esquire

MATHEWS & DOWNIE, P.A.

Post Office Box 10036

Tallahassee, Florida 32301

E. Gary Early, Esquire

AKERMAN, SENERFITT, & EIDSON, P.A.

Post Office Box 10555

Tallahassee, Florida 32302-2555

Thomas K. Maurer, Esquire

FOLEY & LARDNER

111 North Orange Avenue

Suite 1800

Orlando, Florida 32801

Donna E. Blanton, Esquire

Robert M. Rhodes, Esquire

STEEL, HECTOR & DAVIS

215 South Monroe Street

Suite 601

Tallahassee, Florida 32301

Carter B. McCain, Esquire

MACFARLANE, FERGUSON & MCMULLEN

Post Office Box 1531

Tampa, Florida 33601

Ralph A. DeMeo, Esquire

Michael P. Petrovich, Esquire

Post Office Box 6526

Tallahassee, Florida 32314-6526

Bradford C. Vassey, Esquire

Environmental Corporation of America, Inc.

205 Hoover Street, Suite 101

Tampa, Florida 33609

Carroll Webb, Executive Director

Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399-1300

Liz Cloud, Chief

Bureau of Administrative Code

The Elliott Building

Tallahassee, Florida 32399-0250

NOTICE OF RIGHT TO JUDICIAL REVIEW

This Final Order is subject to judicial review pursuant to

Section 120.68, Florida Statutes.