The 2008 Amendments to the APA: The Open Government Act
In 2007, the Florida Legislature approved a number of changes to Florida’s Administrative Procedure Act (APA).1 Among other things, the 2007 bill would have provided for additional restrictions on the use of unadopted rules, based largely on recommendations by the Joint Administrative Procedures Committee (JAPC).2 The governor vetoed this measure because of concerns regarding unintended consequences, and he directed state agencies to work with the legislature “to address any concerns, recommend changes to streamline government, simplify procedures, and better serve the people of Florida.”3
During the 2008 regular session, the legislature revised the 2007 bill to address the governor’s concerns and enacted Senate Bill 704, which was signed by the governor.4 This article provides a brief summary of some of the principal provisions in The Open Government Act (the act), as well as those changes to the 2007 bill that were designed to address issues raised by the governor’s office.
Much of the 2008 act reflects the legislature’s continuing insistence that agencies adopt their policies pursuant to the rulemaking procedures in the APA. The legislature’s view is based upon the primary goals of the APA; namely, to combat “phantom government” by providing notice of agency policy, encouraging public participation in the development of that policy, and ensuring legislative oversight of delegated authority. Accordingly, the bill was given the short title, “The Open Government Act,” and some of the key sections in the act are designed to address concerns with unadopted rules.
Defines “Unadopted Rule.” Subsection 120.52(20) is created to define unadopted rule as “an agency statement that meets the definition of the term ‘rule’ but has not been adopted pursuant to the [rulemaking] requirements of [F.S. §]120.54.”
Effect of Filing a Challenge to Agency Statements Defined as Rules. The legislative requirement for agency rulemaking in F.S. §120.54(1) requires that agency statements meeting the definition of a rule be adopted as soon as practicable and feasible. Section 120.56(4) establishes a procedure for challenging agency statements defined as rules. If the administrative law judge enters a final order holding that all or part of an agency statement violates the rulemaking requirement, then the agency is required to immediately discontinue all reliance upon the statement or any substantially similar statement as a basis for agency action.5
Agencies typically have responded to such challenges by initiating rulemaking to adopt the challenged statement because this generally results in a stay of the challenge and may ultimately moot it.6 In such cases, the agency could continue to rely upon the challenged statement if the agency demonstrated — “proved up” — that the unadopted rule was not an invalid exercise of delegated legislative authority and that the rule was not being applied without due notice.
The 2007 bill would have made significant changes to these provisions. In particular, it provided that upon the filing of a petition for administrative determination that an agency statement violates the rulemaking requirement, the agency must immediately discontinue all reliance upon the statement or any substantially similar statement as a basis for agency action until any of the following occurs: 1) the proceeding is dismissed; 2) the statement is adopted and becomes effective as a rule; 3) a final order is issued that contains a determination that the petitioner failed to prove the statement constitutes a rule; or (4) a final order is issued that contains a determination that rulemaking is not feasible or practicable.
This feature of the 2007 bill proved to be the most controversial and was the basis of the governor specifically mentioning it — and only it — in his veto message, stating that “such a provision amounts to an injunction against the agency in the absence of any allegation of harm by the challenger and halts enforcement or implementation of laws.”7 As a result, this provision was deleted from the 2008 bill. However, as noted below, the act amends F.S. §120.57(1)(e) to provide that effective January 1, 2009, an agency or administrative law judge generally may not base agency action that determines the substantial interest of a party on an unadopted rule.
Agencies May Not Rely on Unadopted Rules. As explained above, the APA currently allows an agency to rely upon a challenged unadopted statement if the agency is proceeding expeditiously and in good faith to adopt rules that address the challenged unadopted statement and the agency “proves up” the unadopted statement in accordance with F.S. §120.57(1)(e). However, the act amends F.S. §120.57(1)(e) to expressly provide that, effective January 1, 2009, an agency or an administrative law judge may not base agency action that determines the substantial interests of a party on an unadopted rule.
Agencies May Apply Adopted Rules to Facts. Notably, this new requirement expressly does not preclude application of adopted rules and applicable provisions of law to the facts. This provision appears to be consistent with the court’s ruling in The Environmental Trust v. State, Dept. of Envtl. Protection, 714 So. 2d 493, 498 (Fla. 1st DCA 1998), where a majority of the court held that “[a]n agency statement explaining how an existing rule of general applicability will be applied in a particular set of facts is not itself a rule.” (e.s.) The scope of this exception remains to be determined, but it does not appear that an agency may apply a general statement that “does not derive directly or indirectly from” a properly adopted rule or applicable provision of law8 or apply its interpretation of the rationale of adopted rules to circumstances not contemplated by the agency when it adopted the rules.9
Exception for Recently Enacted Statutes. In addition to the provision that makes it clear that agencies may not rely on unadopted rules, the prove up provisions of F.S. §120.57(1)(e) are deleted, with one exception. At the request of the governor’s office, an exception was created in that paragraph to allow an agency’s action to be based on unadopted rules, subject to review of the administrative law judge, if an agency demonstrates 1) that the statute being implemented directs it to adopt rules; 2) that the agency has not had time to adopt those rules because the requirement was so recently enacted; and 3) that the agency has initiated rulemaking and is proceeding expeditiously and in good faith to adopt the required rules. This new exception is similar to, but narrower than, the provision repealed by the act that provides an exception to the rulemaking requirement where the agency demonstrates that rulemaking is not practicable or feasible because, for example, “the agency is currently using the rulemaking procedure expeditiously and in good faith to adopt rules which address the statement.”10
Revises Procedures for Staying Challenges to Unadopted Rules. The act seeks to simplify provisions that encourage an agency to initiate rulemaking in response to a challenge to an unadopted rule. New language in F.S. §120.56(4) provides that, upon notification to the administrative law judge before the final hearing that the agency has published a notice of rulemaking under F.S. §120.54(3), such notice shall automatically operate as a stay of proceedings pending adoption of the statement as a rule. The administrative law judge may vacate the stay for good cause shown. A stay of proceedings pending rulemaking shall remain in effect so long as the agency is proceeding expeditiously and in good faith to adopt the statement as a rule.
Revises Defenses to Rulemaking Requirement. Because an agency is entitled to a stay of the rule challenge proceedings pending rulemaking, the act amends F.S. §120.54(1)(a) to delete the language that previously provided a “defense” to the rulemaking requirement where the agency is currently using the rulemaking procedure expeditiously and in good faith to adopt rules that address the challenged statement. And, as noted above, another new provision in the act allows an agency’s action to be based on unadopted rules, subject to review of the administrative law judge, if an agency demonstrates that it has initiated rulemaking in response to a recent legislative direction to do so and is proceeding expeditiously to adopt the rule.
Does Not Impair Existing Contracts. The APA provides that if the administrative law judge enters a final order that all or part of an agency statement violates a rulemaking requirement in F.S. §120.54(1)(a), then the agency must immediately discontinue all reliance upon this statement, or any substantially similar statement, as a basis for agency action. In response to concerns from the governor’s office, F.S. §120.56(4)(d), is revised to provide that “[t]his paragraph shall not be construed to impair the obligation of contracts existing at the time the final order is entered,” apparently seeking to change the result in Disability Support Services, Inc. v. DCF & AHCA, DOAH Case No. 96-5104RU, aff’d per curiam, DCF v. Disability Support Services, Inc., 722 So. 2d 195 (Fla. 1st DCA 1998), where the administrative law judge concluded that the agency “cannot escape the rulemaking requirements of section 120.54 merely by labeling the generally applicable agency statements as contract provisions rather than rules.” This new exception does not apply to contracts that have not been executed at the time the final order is entered. And as this is a substantive change, it does not appear it would apply to contracts executed prior to January 1, 2009, the effective date of this provision.
Increases Limits on Attorneys’ Fees. Effective January 1, 2009, the act amends F.S. §120.595 to increase from $15,000 to $50,000 the limit on attorneys’ fees that may be awarded to the prevailing party in challenges to proposed and existing rules. The act also makes clear that attorneys’ fees are available in challenges to emergency rules.
Revises Attorneys’ Fees in Challenges to Unadopted Rules. While the APA always has included a limit on the attorneys’ fees that may be awarded in cases involving challenges to proposed or existing rules, there is no similar limit on attorneys’ fees that may be awarded in cases involving challenges to unadopted rules. However, agencies typically avoided the risk of paying attorneys’ fees in such cases by initiating rulemaking to adopt the challenged unadopted statement. Effective January 1, 2009, the act makes three notable changes to F.S. §120.595(4), the provision governing attorneys’ fees in cases involving challenges to unadopted rules.
Requires 30-day Notice. The act amends F.S. §120.595(4) to allow for the award of attorneys’ fees and costs in challenges to unadopted statements only upon a finding that the agency received notice at least 30 days before the petition was filed that the statement may constitute an unadopted rule and the agency failed to publish the required notice of rulemaking that addresses the statement within that 30-day period. Notice to the agency may be satisfied by its receipt of the petition, a notice or other paper containing substantially the same information, or a petition for rulemaking filed pursuant to F.S. §120.54(7). The 30-day notice requirement was added based on discussions with the governor’s office, and it continues to provide a “safe harbor” during which the agency may initiate rulemaking and avoid liability for attorneys’ fees.
If the Agency Initiates Rulemaking. As noted, the APA currently allows agencies to avoid the risk of paying attorneys’ fees by initiating rulemaking to adopt the challenged unadopted statement prior to the issuance of a final order.11 In an effort to encourage agencies to promptly determine whether to initiate rulemaking, and thus minimize litigation expenses for the challenger and the agency, the act amends F.S. §120.595(4) to provide that, if prior to the final hearing (but after the 30-day notice described above) the agency initiates rulemaking and requests a stay of the proceedings pending rulemaking, the administrative law judge shall award reasonable costs and reasonable attorneys’ fees accrued by the petitioner prior to the date the agency published notice of rulemaking.12 At the request of the governor’s office, this provision was amended to allow the agency to avoid fees in such cases if the agency shows that it did not know, and should not have known, that the statement was an unadopted rule. Given the new 30-day notice requirement discussed above, it may be quite difficult for an agency to make such a showing. An award of attorneys’ fees under this new provision — where the agency initiates rulemaking prior to the entry of a final order — may not exceed $50,000. However, there continues to be no limit on the amount of attorneys’ fees that may be awarded in cases involving successful challenges to unadopted rules.
The act also makes changes that are designed to provide for an award of attorneys’ fees if the agency initiates rulemaking, but the proposed rule addressing the challenged statement is determined to be invalid. In such cases, the agency must discontinue reliance on the statement and any substantially similar statement until a rule addressing the subject is properly adopted. Specifically, F.S. §120.56(4)(e) is revised to require the administrative law judge to enter an order to that effect and F.S. §120.595(4)(a) is amended to provide that the entry of such an order entitles the challenger to an award of reasonable attorneys’ fees and costs.
If the Agency Prevails. Section 120.595(4) is amended to provide that, if the agency prevails in the proceedings, the administrative law judge or appellate court shall award reasonable costs and attorneys’ fees against the party if 1) the party participated in the proceedings for an improper purpose; or 2) the party or the party’s attorney knew or should have known that a claim was not supported by the material facts necessary to establish the claim or would not be supported by the application of then-existing law to those material facts. This latter ground is similar to that contained in F.S. §57.105, and was added at the request of the governor’s office in an effort to “close the gap” between the different attorneys’ fees standards that apply depending upon whether the agency or the challenger is the prevailing party.
Defines and Clarifies Rulemaking Authority. The act adds new definitions to F.S. §120.52, including a definition of “rulemaking authority.”13 The term is defined to mean “statutory language that explicitly authorizes or requires an agency to adopt, develop, establish, or otherwise create any statement coming within the definition of the term ‘rule.’”14 The definition is intended to clarify that agencies have the duty or authority to adopt rules, pursuant to the APA, in cases where the statutory language directs or authorizes them to “adopt policies” or “establish criteria” or the like, even though the word “rule” is not used in the authorizing statute.
Clarifies that Specific Powers and Duties Conferred Are Those in the “Enabling” Statute. The definition of “invalid exercise of delegated legislative authority” in F.S. §120.52(8) is revised. Previously, this subsection provided that statutory language granting rulemaking authority to an agency was to be construed no further than implementing or interpreting the specific powers and duties conferred by the “same” statute.15 The act amends the definition to refer instead to the specific powers and duties conferred by the “enabling” statute. The same change is made to similar language in F.S. §120.536.
Defines “Law Implemented.” A new definition of “law implemented” is added; it, too, makes clear that it refers to the language of the enabling statute being carried out or interpreted by an agency through rulemaking. The APA requires proposed and adopted rules to include a citation to the law implemented, and a rule is invalid if it enlarges, modifies, or contravenes the specific provisions of law implemented.
Clarifies Authority to Delegate Rulemaking Responsibilities. The act amends F.S. §120.54(1)(k) to clarify that certain rulemaking responsibilities of an agency head may not be delegated or transferred. These include approval of the notice of intended action and the filing of the approved rule with the Department of State.16 However, at the request of the governor’s office, this same provision was modified to provide that an agency head may delegate the authority to initiate rule development under F.S. §120.54(2). Section 120.55(5) is amended to require all rule notices to include the name of the “agency head” that approved the rule.
Requires Certain Collegial Boards to Conduct Public Hearings. The rulemaking requirements in the APA generally provide that the agency must give affected persons the opportunity to present evidence and argument. In addition, the agency must, if requested by an affected person, schedule a public hearing on the proposed rule. The act amends F.S. §120.54(3)(c) to require that if the agency head is a board created within the Department of Business and Professional Regulation or the Department of Health, Division of Medical Quality Assurance, the board itself shall conduct at least one of the public hearings and may not delegate this responsibility without the consent of those persons requesting the public hearing.
Requires SERC to be Made Available. Section 120.54(3)(e) is amended to provide that a proposed rule may not be filed with the Department of State — and, therefore, may not become effective — until the statement of estimated regulatory costs (SERC) has been provided to all persons who submitted a lower-cost regulatory alternative and has been made available to the public. Another bill enacted in 2008, HB 7109, requires an agency to prepare a SERC in all cases in which the proposed rule will have any impact on small business.17
Clarifies JAPC Authority. The act amends F.S. §120.545 to clarify the duties and powers of the Joint Administrative Procedures Committee (JAPC). Among other things, JAPC is now expressly authorized to consider whether a SERC complies with all applicable requirements and to object to a proposed rule if the accompanying SERC does not comply.18
Authorizes Cross References to Other Rules of the Same Agency. The APA provides that a rule may incorporate material by reference, but only material in existence on the date the rule is adopted. For purposes of the rule, changes in the referenced material are not effective unless the rule is amended to incorporate the changes. As such, questions have arisen as to whether an agency rule that incorporates by specific reference another rule of that same agency automatically incorporates subsequent amendments to the referenced rule. The act amends F.S. §120.54(1)(i) to expressly provide that an agency rule that incorporates by specific reference another rule of that agency, automatically incorporates subsequent amendments to the referenced rule unless a contrary intent is clearly indicated in the referencing rule. Any notice of amendment to a rule that has been incorporated by specific reference in other rules of that agency must explain the effect of the amendment on the referencing rules.
Requires Material Incorporated by Reference to be Available Online. For rules adopted after 2010, the act also amends F.S. §120.54(1)(i) to provide that material may not be incorporated by reference unless the material’s full text can be made available for free public access through an electronic hyperlink from the rule in the Florida Administrative Code. However, if the agency determines that posting the material would violate federal copyright law, then a statement to that effect must be included in the notice, along with the address of locations at the Department of State and the agency where the material is available for public inspection.
Requires Electronic Publication of Code. Effective July 1, 2010, the Department of State must publish electronically the Florida Administrative Code on an Internet Web site managed by the department. The electronic code is to display each rule chapter currently in effect in browse mode and must allow for a full text search of the code and each rule chapter.
Clarifies Deadlines for Filing Rule Challenges. Section 120.56(2)(a) is amended to clarify the deadlines for filing challenges to proposed rules when a public hearing has been held or the agency is required to prepare a statement of estimated regulatory costs. The APA provides several “windows” for filing challenges to proposed rules. One of these windows is within 10 days after the final public hearing is held on the proposed rule as provided by F.S. §120.54(3)(c). The act changes this reference to “section 120.54(3)(e)2,” which expressly provides that the term “public hearing” includes any public hearing held by any agency in which the rule was considered. A second window is within 20 days after the “preparation” of a SERC. The act conforms these windows to other provisions of the APA so that the time begins to run only after the statement “has been provided to all persons who submitted a lower cost regulatory alternative and made available to the public.”19
Authorizes Posting of Final Orders on DOAH’s Web site. Section 120.53(2)(a) is amended to authorize (but not require) agencies to fulfill their indexing requirements by posting their final orders on DOAH’s Web site.
Restores Language Regarding Disputed Issues of Material Fact and Informal Proceedings. The act amends F.S. §120.569(1) to make clear that if a disputed issue of material fact arises during an informal proceeding, the informal proceeding under F.S. §120.57(2) shall be terminated and a formal proceeding under F.S. §120.57(1) shall be conducted, unless waived by all parties. Similar language previously was included in Uniform Rule 28-106.305, but was deleted by the Administration Commission in early 2007, reportedly because it was not authorized by statute.
Effective Date. The act takes effect July 1, 2008, except as otherwise expressly provided.20 Several of the sections have delayed effective dates. For example, the provisions governing challenges to agency statements defined as rules, reliance on unadopted rules, and changes to attorneys’ fees, all become effective January 1, 2009. The requirement to publish an electronic version of the Florida Administrative Code is effective July 1, 2010.
1 See Fla. HB 7183 (2007) (vetoed June 27, 2007).
2 JAPC prepared reports in 2006 and 2007 on unadopted rules. SeeFla. Legis. Jt. Admin. Procs. Comm., Report on Unadopted Rules (Feb. 2006); Fla. Jt. Admin. Procs. Comm., Supplement to Report on Unadopted Rules (Feb. 2007), available at www.japc.state.fl.us/publications.cfm.
3 Veto of Fla. HB 7183 (2007) (letter from Gov. Crist to Sec’y of State Kurt S. Browning, June 27, 2007) (on file with Sec’y of State, The Capitol, Tallahassee, Fla.). In his veto letter, the governor expressed concern that the bill “substantially rewrites the [Administrative Procedure] Act, potentially creating a number of unintended consequences detrimental to the efficient operation of our [s]tate government.” The 2007 bill addressed a number of issues, but the governor’s veto letter mentioned only the provision in the bill that would have limited an agency’s authority to rely on unadopted statements that are subject to pending legal challenges.
4 Ch. 2008-104, Laws of Fla.
5 For discussion of the limits of agency reliance on nonrule policies, see Kent Wetherell, Lawrence E. Sellers, Jr. & Wade L. Hopping, Rulemaking Reforms and Non-Rule Policies: A Catch-22 for State Agencies, 71 Fla. B. J. at 20 (Mar. 1997); Lawrence E. Sellers, Jr. & Cathy M. Sellers, Non-Rule Policy and the Legislative Preference for Rulemaking, 75 Fla. B. J. at 38 (Jan. 2001).
6 This is what transpired in Day Cruise Association, Inc. v. Board of Trustees of the Internal Improvement Trust Fund, Case No. 99-5303RP (DOAH Feb. 17, 2000). The association initially challenged the board’s unadopted policy pursuant to Fla. Stat. §120.56(4), and the trustees responded by initiating rulemaking and publishing the challenged policy as a proposed rule. The association then challenged the proposed rule pursuant to Fla. Stat. §120.56(2), and the administrative law judge determined the proposed rule to be invalid. That determination was affirmed on appeal. Board of Trs. of the Internal Improvement Trust Fund v. Day Cruise Ass’n, Inc., 794 So. 2d 696 (Fla. 1st D.C.A. 2001), reh’g denied, 798 So. 2d 847, rev. denied, 823 So. 2d 123 (Fla. 2002).
7 See veto of HB 7183 (2007), note 3.
8 Amos v. Dept. of Health & Rehab. Servs., 444 So. 2d 43, 46 (Fla. 1st D.C.A. 1983).
9 Coastal Petroleum Co. v DEP, Case No. 98-1901 (DEP May 10, 1999).
10 See Fla. Stat. §120.54(1)(a) (2007).
11 Osceola Fish Farmers Ass’n v. SFWMD, 830 So. 2d 932 (Fla. 4th D.C.A. 2002).
12 Ch. 2008-104, §13.
13 Id. at §2.
14 Id. (emphasis supplied).
15 The phrase “by the same statute,” which was replaced by the phrase “by the enabling statute,” was an issue in JM Auto v. DHSMV, Case No. 07-0603RX (DOAH April 20, 2007), aff’d, 977 So. 2d 733 (Fla. 1st D.C.A. 2008).
16 This change reflects the court’s ruling in Financial Serv. Comm’n v. Fla. Ins. Council, Inc., 938 So. 2d 545 (Fla. 1st D.C.A. 2006).
17 Ch. 2008-149, §7.
18 The 2007 bill also would have made clear that JAPC is authorized to review and object to unadopted agency statements. Fla. HB 7183 §5 (2007). This provision was not included in the 2008 bill, although JAPC already is authorized to review and object to any agency “rule,” whether properly adopted or not. Fla. Stat. §120.545 (2007). In addition, JAPC is authorized to make recommendations for needed legislation or other appropriate action and to seek judicial review of the validity or invalidity of any rule to which the committee has voted an objection. Fla. Stat. §11.60(2)(f).
19 See Fla. Stat. §§120.54(3)(e)2, 120.56(2)(a).
20 The act does not indicate whether it applies to proceedings that began but were not completed prior to the effective date. comparison, the version of the APA originally enacted in 1974 included provisions intended to address the effect of the new act on pending adjudicatory proceedings. The general rule is that a statute that relates only to a procedural remedy applies to all pending cases, but there can be no retroactive application of substantive law without a clear directive from the legislature. For example, Florida courts previously have held that the right to collect attorneys’ fees may be substantive in nature and, therefore, may not be applied retroactively. Mullins v. Kennelly, 847 So. 2d 1151 (Fla. 5th D.C.A. 2003) (holding that amendments to F.S. §57.105 are not retroactive). In one of the first appellate decisions interpreting the 1996 APA legislation, the court concluded that changes involving the requirement of an administrative order to include a ruling upon each proposed finding were “means and methods” by which the administrative determination is rendered, and, therefore, procedural in nature. Life Care Ctrs. of Am., Inc. v. Sawgrass Care Ctr., Inc., 683 So. 2d 609, 614 (Fla. 1st D.C.A. 1996).
Lawrence E. Sellers is a partner in the Tallahassee office of Holland & Knight LLP. He received his J.D., with honors, from the University of Florida College of Law.
This column is submitted on behalf of the Administrative Law Section, Elizabeth W. McArthur, chair, and Deborah K. Kearney, editor.