Standing in Rule Challenges After Office of Insurance Regulation & Financial Services Commission v. Secure Enterprises, LLC
Last fall, the First District Court of Appeal issued an opinion in Office of Insurance Regulation & Financial Services Commission v. Secure Enterprises, LLC, 124 So. 3d 332 (Fla. 1st DCA 2013), that, at least at first glance, appeared to depart from established precedent governing standing1 in rule challenge proceedings under the Florida Administrative Procedure Act (APA). The court reversed a determination by Administrative Law Judge (ALJ) Robert Meale that a company had standing to challenge a form incorporated into a rule.2 Following issuance of the opinion, in a subsequent rule challenge, Guardian Interlock, Inc. v. Department of Highway Safety & Motor Vehicles, Case No. 13-3685RX (DOAH Jan. 10, 2014), Judge Meale wrote an 80-page final order analyzing appellate caselaw concerning standing in rule challenges and outlining the courts’ sometimes inconsistent application of the standing test.
Judge Meale’s final order in Guardian Interlock should be reviewed by every practitioner grappling with standing issues in a rule challenge. He carefully chronicles each appellate court opinion that analyzes standing in a rule challenge proceeding between 1977 and 2013 and demonstrates how the doctrine of standing has evolved. This article summarizes some key themes found in Judge Meale’s Guardian Interlock final order and in the cases he addresses and suggests how to approach a standing issue in a rule challenge.
Elements of Standing
The test for standing in a rule challenge appears to be relatively straightforward. F.S. §120.56(1)(a) provides that “[a]ny person substantially affected by a rule or proposed 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.” In Jacoby v. Florida Board of Medicine, 917 So. 2d 358, 360 (Fla. 1st DCA 2005),3 the court explained that in order to establish that someone is “substantially affected,” the person or entity must demonstrate: “(1) that the rule or policy will result in a real and immediate injury in fact, and (2) that the alleged interest is within the zone of interest to be protected or regulated.” The application of this test has proved difficult for the courts. Judge Meale’s analysis in Guardian Interlock highlights both some consistencies and some inconsistencies in the caselaw.
Historical Application of the Standing Test
In the majority of rule challenge cases, especially in recent years, Florida appellate courts have found that the party challenging the rule had standing. The facts and interests of the party vary widely in these cases, and often cases that seem factually similar result in different outcomes, even by the same court. However, some overarching themes have emerged.
Injury in Fact
The first, and most important, element to establish standing in a rule challenge is to prove that the rule or proposed rule will cause immediate and real injury in fact. The person/entity challenging the rule must be the one to suffer the actual injury as explained by the court in All Risk Corp. of Florida v. State, Department of Labor & Employment Security, Division of Workers’ Compensation, 413 So. 2d 1200, 1202 (Fla. 1st DCA 1982). There are several categories of cases in which injury in fact is analyzed.
• Rules Subjecting a Person/Entity to a Penalty — In Ward v. Board of Trustees of the Internal Improvement Trust Fund, 651 So. 2d 1236, 1237 (Fla. 4th DCA 1995), the court explained that a sufficient and immediate injury exists when a person or entity will be subject to a penalty by a proposed rule. In Ward, an engineer contended that complying with the rules of the Board of Trustees of the Internal Improvements Trust Fund relating to the construction of docks on aquatic preserves would create unsafe docks, which would subject him to discipline under the engineering licensing statutes.4 The court agreed that he would be subject to discipline and, thus, was substantially affected by the rule.5 Similarly, in Lanoue v. Florida Department of Law Enforcement, 751 So. 2d 94, 98 (Fla. 1st DCA 1999), the court found that the party who failed a breathalyzer test could challenge the rules providing specifications for the breathalyzer test because he had been charged with driving under the influence, and if he were to be found guilty, he would be subject to penalties.
• Economic Injury — Before Secure Enterprises, it was generally assumed that economic injury was sufficient to confer standing in a rule challenge case. For example, in Florida Medical Association, Inc. v. Department of Professional Regulation, 426 So. 2d 1112, 1114-15 (Fla. 1st DCA 1983), the Florida Medical Association was found to have standing to challenge a rule promulgated by the Board of Optometry that would allow optometrists to prescribe certain drugs when the statutes in effect at that time permitted only physicians to prescribe drugs. Likewise, in Department of Professional Regulation, Board of Dentistry v. Florida Dental Hygienist Association, Inc., 612 So. 2d 646, 651-52 (Fla. 1st DCA 1993), the court found that the Dental Hygienist Association had standing to challenge a proposed rule of the Board of Dentistry that would permit board approval of dental hygiene schools that did not meet certain accreditation standards.
Two additional cases based standing on economic injury: Abbott Laboratories. v. Mylan Pharmaceuticals, Inc., 15 So. 3d 642 (Fla. 1st DCA 2009), and Televisual Communications, Inc. v. State, Department of Labor & Employment Security, 667 So. 2d 372 (Fla. 1st DCA 1995).6 In Abbott Laboratories, the court found that the party challenging a rule was substantially affected because “the final order will directly lead to significant market share losses.”7 The court found a similar economic interest in Televisual when the Department of Labor and Employment Security’s proposed rules establishing requirements for health care providers to be eligible for workers’ compensation payments included a requirement that physicians complete a minimum five-hour training course with a qualified and approved live instructor.8 The court found that Televisual, a company that provided education materials to health care providers, had standing as the financial impact of the rule on Televisual (which was supported by testimony) was not speculative.9
• Rules Affecting Professional Licenses — A person suffers an injury in fact when a rule directly regulates his or her profession or encroaches upon his or her license.10 The court in Florida Medical Association, explained that the right to practice medicine was a valuable property right and the right of professionals to practice their professions conferred standing to challenge encroachments upon their professional interests.11 Similarly, in Jacoby, the court found that an out-of-state physician who was denied a Florida license was adversely affected and within the zone of interests, stating that “if an individual is affected by licensing rules because that individual works in the area that is regulated, the ‘substantially affected’ requirement is satisfied.”12
• Collateral Regulation of Profession or Industry — A rule that does not directly regulate a profession, but has the collateral effect of regulating the professional conduct of a person within an occupation is also sufficient to demonstrate injury in fact.13 In Ward, while the rules did not per se regulate the engineer’s professional conduct, the court explained that it was “clear that appellant would be immediately affected by these rules relating to the construction of docks. . . in that he must comply with them. ”14
In Televisual, in addition to the financial impact, the court determined that the company was affected by the rule because the rule had a collateral effect of regulating its industry.15 Likewise, in Florida Board of Medicine v. Florida Academy of Cosmetic Surgery, Inc., 808 So. 2d 243, 251 (Fla. 1st DCA 2002), the court found that a proposed rule of the Board of Medicine that would require anesthesiologists be present for all level III office surgeries collaterally affected certified registered nurse anesthetists (CRNA), based on testimony of doctors that they would not hire CRNAs if they were required to hire anesthesiologists.
• Prospective Injuries — A party does not have to comply with the rule or already have suffered injury from the rule to have standing.16 In Professional Firefighters of Florida, Inc. v. Department of Health & Rehabilitation Services, 396 So. 2d 1194, 1195 (Fla. 1st DCA 1981), the court stated that “[t]he APA permits prospective challenges to agency rulemaking and does not require that an affected party comply with the rule at his peril in order to obtain standing to challenge the rule.” The Florida Supreme Court found standing in NAACP, Inc. v. Florida Board of Regents, 863 So. 2d 294, 300 (Fla. 2003), when it found that students in the association were substantially affected by changes in the affirmative action rules because they were “genuine prospective candidates for admission to the state university system.”
Although the injury can be prospective, it cannot be speculative. In State, Board of Optometry v. Florida Society of Ophthalmology, 538 So. 2d 878, 881 (Fla. 1st DCA 1988), the court refused to find standing when determining whether the application of a rule implementing a new law that authorized optometrists to prescribe certain drugs would cause any harm to ophthalmologists was “purely a matter of speculation and conjecture.”
• Prior Injury — If a person was previously affected by a rule, the person must demonstrate that there is a present adverse effect. For example, in Florida Department of Offender Rehabilitation v. Jerry, 353 So. 2d 1230, 1235 (Fla. 1st DCA 1978), the court found that an inmate lacked standing to challenge a rule related to discipline because he had already been disciplined and any future disciplinary proceedings were based on future infractions and, thus, speculative. Similarly, the court found in State, Department of Health & Rehabilitative Services v. Alice P., 367 So. 2d 1045, 1051-52 (Fla. 1st DCA 1979), that a woman who was no longer pregnant did not have standing to challenge a rule related to Medicaid funding for abortions. A person may demonstrate standing based on past injury if he or she is likely to be affected by the rule again.17
• Rules Affecting a Person’s Right or Interest — A person may be substantially affected by a rule if the rule has the effect of taking away a person’s right or interest. In Professional Firefighters, prior to the rule at issue, paramedics could practice without certification, but the new rule created new restrictions that would prohibit them from practicing unless they were certified.18 Likewise, in Cole Vision Corp. v. Department of Business & Professional Regulation, 688 So. 2d 404, 407 (Fla. 1st DCA 1997), the court explained that under the current rule corporations could operate retail establishments without a license to practice. Thus, a rule requiring corporations to be licensed would take away that ability.19
Zone of Interest
Perhaps most interesting in Judge Meale’s Guardian Interlock order are his observations about the appellate courts’ application of the zone of interest test. His conclusion is that the test is “useless, at best.”20 Judge Meale posits that, at worst, the “test imposes access requirements not authorized by statute.”21 Judge Meale explains that the zone of interest test has been applied in several different ways and often not at all. In fact, there is not one rule challenge appellate opinion in which injury has been found, but standing was denied because the injury was not within the zone of interests protected by the statute.22
Some cases , such as NAACP, and State, Department of Financial Services v. Peter R. Brown Construction, Inc., 108 So. 3d 723, 725-26 (Fla. 1st DCA 2013), discuss standing in a rule challenge without mentioning the zone of interest test. Other cases mention zone of interest when explaining the standing test, but then do not apply it.23 In Montgomery v. Department of Health & Rehabilitative Services, 468 So. 2d 1014, 1016 (Fla. 1st DCA 1985), the First District Court of Appeal stated, “In Florida, the courts have adopted the federal ‘injury-in-fact’ test governing standing,…and the federal ‘zone of interest’ test where applicable. ” (Emphasis added.) The court then said that it was only concerned with whether the parties met the injury in fact test.24 The court did not explain when the zone of interest test was “applicable.”
Secure Enterprises, LLC
In Secure Enterprises, the Office of Insurance Regulation (OIR) amended several rules and incorporated new forms in response to a statutory change requiring insurers to give discounts or credits to homeowners who implemented certain mitigation measures to reduce loss in a windstorm.25 One of the new forms provided that homeowners were entitled to “opening protection” credit for “windows or all,” meaning that homeowners who upgraded only windows received the same credit as homeowners who upgraded both windows and doors.26
Secure Enterprises, a company that manufactured a residential wind-resistant garage door bracing system, challenged the form because it did not include a separate credit for homeowners who upgraded their garage doors, which it contended was required by the new law.27 Secure Enterprises argued that it was substantially and negatively affected because it had experienced a loss of sales to homeowners who would otherwise purchase Secure Enterprises’ product if the OIR forms informed homeowners that the product qualified for an insurance premium credit.28
In his final order, Judge Meale found that economic injury to Secure Enterprises could be inferred because a premium discount for the one-time purchase and installation of the product, given the low cost, would mean increased sales.29 Judge Meale also found that Secure Enterprises’ financial interest was “collaterally” within the zone of interest protected by the statute, which mandated insurance discounts for mitigative goods and services, including those provided by Secure Enterprises.30
In rejecting the ALJ’s findings, the court distinguished each of the three cases it said the ALJ primarily relied upon: Televisual; Abbott Labs; and Dental Hygienist.31 The court found that while economic injury could sometimes form the basis for injury in a rule challenge, it could not in this case because it was not a situation in which economic competition was going to create injury, which had been the case in Abbott Labs and Dental Hygienist.32 Instead, Secure Enterprises was claiming economic injury based on the absence of an insurance credit that homeowners had never been provided before. Thus, Secure Enterprises did not have a protected right that had been impaired. The court, however, stated that if a credit had been taken away, Secure Enterprises would have had a stronger argument.33 The court also found that the proposed rule did not collaterally affect or regulate the appellant’s industry. Finally, the court found that the injury was speculative and that Secure Enterprises failed to show immediate or real harm.34
The court also held that the economic injury was not within the zone of interest protected by the statutes or rules.35 The court stated that the intent of the statute was to provide savings to consumers who install equipment to mitigate windstorm damage, and there was nothing in the statutory language that indicated any intent to provide a financial benefit to manufacturers of products that may be used in this endeavor. Thus, the court held that Secure Enterprises lacked standing to bring the rule challenge.36
After Secure Enterprises
As Judge Meale points out in Guardian Interlock, the appellate cases inconsistently apply the standing test. In fact, the First District Court of Appeal has acknowledged this inconsistency, stating that “[t]he federal law of standing is complex, inconsistent, and unreliable” and that Florida law “arguably may be said to be subject to the same vagaries.”37 Secure Enterprises does not add any clarity.
A review of these cases demonstrates that proving injury is the most important factor in obtaining standing in a rule challenge. In all cases, the courts determine whether there is an injury in fact, but only sometimes do the courts address whether that injury is within the zone of interest to be protected by statute. Secure Enterprises indicates, however, that the zone of interest test is still applicable. As a matter of historic results, when courts apply the zone of interest test, the zone of interest tends to go hand-in-hand with the injury test.38
The question remains as to whether Secure Enterprises actually changes the law. The court in Secure Enterprises did not recede from any previous opinions or precedent. Instead, the court attempted to distinguish these cases factually. Thus, these cases are still good law. It appears that Secure Enterprises has not necessarily changed the law, but it is one more case to consider when applying the standing analysis to a specific factual scenario, especially when the arguments include economic injury or collateral regulation of an industry.
Approaching a Standing Issue in a Rule Challenge
Because the issue of whether a person or entity has standing in a rule challenge is a fact-specific inquiry, a practitioner should be familiar with all of these cases. A party seeking to establish standing should try to fit the case in one of the categories in which the courts have found a party to be substantially affected: 1) the rule regulates the party’s profession; 2) the rule collaterally regulates the party’s profession; 3) the rule imposes a penalty on the party seeking standing; or 4) the rule takes away a right or directly affects the party. It appears from Secure Enterprises that if a party is arguing that it is collaterally regulated by a rule, the party should show not only that the rule affects its industry, but also that it actually also places some kind of requirement or prohibition on those in the industry. Economic interest may be a basis for standing, but after Secure Enterprises, the other categories provide a stronger argument in support of standing.
A party also needs to identify and prove a specific injury to the party itself. To establish standing based on a prospective injury, the party must provide evidence that the injury is not speculative. If the injury is economic and not related to competition, the party may have a higher burden to demonstrate standing.
As to zone of interests, Secure Enterprises does little to clarify what test applies. In Guardian Interlock, Judge Meale opted to apply a broad federal test for zone of interest instead of any caselaw.39 There is no clear explanation of what the zone of interest encompasses.
When standing is an issue in a rule challenge, a thorough understanding of the relevant cases in which standing was contested is critical. A good way to start is by reading Judge Meale’s order in Guardian Interlock to identify cases that are most supportive to the particular facts in the case. Additionally, it is always important to research other rule challenge orders the assigned ALJ may have written to determine how he or she has approached standing in the past.
1 Fla. Stat. §120.56, which governs rule challenge proceedings, does not use the term “standing”; instead, any person who is “substantially affected” can challenge a rule. For simplicity, this article uses the term standing to refer to a person who is substantially affected by a rule.
2 See Secure Enters., LLC v. Office of Ins. Reg. & Fin. Servs. Comm’n, Case No. 12-1944RX (DOAH Oct. 19, 2012).
3 Standing in nonadministrative cases “depends on whether a party has a sufficient stake in a justiciable controversy, with a legally cognizable interest which would be affected by the outcome of the litigation.” Nedeua v. Gallagher, 851 So. 2d 214, 215 (Fla. 1st DCA 2003).
4 Ward, 651 So. 2d at 1237.
6 Secure Enters., Comm’n, Case No. 12-1944RX at ¶¶112-116.
7 Abbott Labs., 15 So. 3d at 652.
8 Televisual Communications, 667 So. 2d at 373.
9 Id. at 373-74.
10 Ward, 651 So. 2d at 1237.
11 Florida Medical Association, 426 So. 2d at 1117.
12 Jacoby, 917 So. 2d at 360.
13 Ward, 651 So. 2d at 1238.
14 Id. (emphasis added).
15 Televisual Communications, 667 So. 2d at 374.
16 Ward, 651 So. 2d at 1238.
17 Jacoby, 917 So. 2d at 360.
18 Professional Firefighters, 396 So. 2d at 1196.
19 Cole Vision Corp., 688 So. 2d at 407.
20 Guardian Interlock, Case No. 13-3685RX at ¶159.
22 In Agrico Chemical Co. v. Dep’t of Environ. Protection, 406 So. 2d 478, 482 (Fla. 1st DCA 1981), the court found that economic injury existed, but it was not within the zone of interest of the applicable permitting statute so the parties lacked standing. Agrico, however, did not involve a rule challenge; instead, third parties were attempting to challenge the proposed issuance of a construction permit to their business competitor. Id. at 478.
23 See Cosmetic Surgery, 808 So. 2d at 250-51; Cole, 688 So. 2d at 407; Dental Hygienists, 612 So. 2d at 649-52.
25 Secure Enterprises, 124 So. 3d at 334.
27 Id. at 335-36.
29 Id. at 336.
31 Id. at 336-39.
32 Id. at 338-39.
33 Id. at 339.
36 Id. at 340.
37 Montgomery, 468 So. 2d at 1016, n.4.
38 There is only one appellate case in which the court found that the alleged injury was “arguably” within the zone of interest of the statute, but the petitioners had not demonstrated that application of the rule would result in a real and immediate injury. See Office of Ins. Reg. v. AIU Ins. Co., 926 So. 2d 479, 480 (Fla. 1st DCA 2006). The opinion is of limited value, however, as it does not explain the facts or why injury was not demonstrated in its one-paragraph opinion.
39 Guardian Interlock, Case No. 13-3685RX at ¶¶163-73.
Brittany Adams Long is of counsel with the Radey Law Firm in Tallahassee. She practices primarily Florida administrative law and litigation.
A version of this article was previously published in the December 2014 issue of the Administrative Law Section Newsletter and is reprinted with permission.
This column is submitted on behalf of the Administrative Law Section, Daniel E. Nordby, chair, and Stephen Emmanuel, editor.