Fee awards in administrative proceedings.

• Author: Dudley, Fred R.
• Position: Part 2 - Florida

This is the second of a two-part series on the recovery of attorneys' fees in administrative proceedings. This article discusses the recovery of attorneys' fees pursuant to F.S. [section][section]57.111 and 120.595. The first article, which appeared in the June edition of The Florida Bar Journal, covered fees in administrative proceedings pursuant to F.S. [section][section]57.105 and 468.619. For a more detailed discussion on this subject, the reader is directed to Ch. 13, "Attorney's Fees and Cost Awards," Florida Administrative Practice, The Florida Bar (10th ed.).

Recovery of Fees Pursuant to F.S. [section]57.111

In 1984, the Florida Legislature enacted F.S. [section]57.111, entitled Florida Equal Access to Justice Act. The legislature enacted F.S. [section]57.111 in recognition that "the greater resources of the state requires a different standard for an award of attorney fees and costs" against the state for the successful defense of "unreasonable governmental action." (1) The act is similar to the Equal Access to Justice Act, which was created in 1948 in 5 U.S.C. [section]504 and 28 U.S.C. [section]2412.

While F.S. [section]57.111 has been primarily applied in licensing and disciplinary cases (many of which are cited herein), it has also been applied in cases involving allegations of unlicensed activity, (2) bid protests, (3) and Medicaid reimbursement refunds. (4) An award of fees and costs under F.S. [section]57.111 was initially limited to a total of $15,000, including those resulting from judicial appeals (5); however, this limit was raised to $50,000, effective June 4, 2003. (6)

Under the act, fees and costs can be awarded only to a "small business party." Prior to 2006, this term was defined in subsection (3), as follows:

(d) 1. The term "small business party" means:

1. A sole proprietor of an unincorporated business, including a professional practice, whose principal office is in this state, who is domiciled in this state, and whose business or professional practice has, at the time the action is initiated by a state agency, not more than 25 full-time employees or a net worth of not more than $2 million, including both personal and business investments; or,

2. A partnership or corporation, including a professional practice, which has its principal office in this state and has at the time the action is initiated by a state agency not more than 25 full-time employees or a net worth of not more than $2 million....

   However, in Daniels v. Florida Department of Health, 898 So. 2d 61 (Fla. 2005), (7) this limited definition was found to exclude individual licensees (to whom most licenses are issued). The Daniels decision led to legislative expansion of this definition, effective July 1, 2006, now to include:

3. An individual whose net worth did not exceed $2 million at the time the action is initiated by a state agency when the action is brought against that individual's license to engage in the practice or operation of a business, profession, or trade;.

   An application for fees must be filed within 60 days "after the date the small business party becomes the prevailing party." This is defined (8) to include voluntary dismissal of the underlying case by the agency, settlement of the matter in the nonagency party's favor on a majority of the issues (without, of course, a waiver of fees), or conclusion of any judicial review of a final order entered by the agency. The latter has been adjudicated to mean, in the case of judicial review, the date the appellate court issues its mandate. (9)

   An evidentiary hearing must be promptly conducted (10) by the administrative law judge (ALJ) pursuant to Ch. 120. After the evidentiary hearing, the ALJ issues a final order (i.e., one that is subject to judicial appeal). Since the ALJ has only "recommended order" authority in disciplinary cases, any award of fees and costs requires that the nonagency party file an affidavit of fees and costs in a separate Division of Administrative Hearings (DOAH) proceeding, the case number for which will include the letter "F" to designate it as a fee case. The agency may also oppose an award of fees and costs by affidavit. (11)

   Many agencies will stipulate to the "entitlement" portion of petitions for fee (i.e., that the nonagency party was the "prevailing party," and meets the definition of "small business party," leaving only the reasonableness of fees and the agency's possible defense at issue); otherwise, strict proof will be required. While there appear to be no cases addressing the applicants' proof of the net worth requirement, the use of a financial statement, perhaps prepared by a public accountant, should be considered in the absence of such stipulation.

   The most frequently used of the two "defenses" (12) available for agencies to use (with the burden of proof being on the agency) (13) is that the agency was "substantially justified" in initiating the action against the nonagency party. "Substantial justification" is defined in F.S. [section]57.111(3)(e) as "having a reasonable basis in law and fact at the time it was initiated by the state agency." However, in a recent survey of administrative fee cases, (14) an agency was found to have been substantially justified in a majority of DOAH cases. Thus, an award of fees was denied in those cases.

   Recovery of Fees in Licensure Cases

   In license disciplinary cases, substantial justification has been construed to mean the point at which a "probable cause" determination has been made by the agency or a board. (15) In license application denials, this has been construed to mean the date of the board's hearing on the application. (16)

   In anticipation that the agency will use this defense, a copy of the transcript for the probable cause panel (PCP) determination should be obtained and reviewed. If, for example, the PCP failed to adequately discuss the investigative report and prosecuting attorney's recommendations, and merely "rubber-stamped" its determination of probable cause, that determination will not be deemed to have been "sufficiently justified." (17)

   In some cases, any determination of probable cause might be rebutted by the use of an expert, so long as that expert's written opinions are made a part of the file to be presented as part of the determination of probable cause. While only a few boards allow the respondent to be present at this determination (with or without legal counsel), it may be possible to provide any expert evidence in advance to the prosecuting attorney with a written request that it be made a part of the record and presented to the panel to support a subsequent claim that the agency was not "substantially justified" in finding probable cause.

   In one case, the credibility of the investigator was used to find "substantial justification," (18) and in another case, the agency's use of only one of three expert reports it had obtained was found sufficient to find "substantial...