What Is a Bad Faith Administrative Petition
The First District Court of Appeal’s recent decision in Friends of Nassau County, Inc., v. Nassau County, 25 Fla. L. Weekly D342 (Fla. 1st DCA Feb. 2, 2000), revisited a commonly raised but unsettled theme: What constitutes a bad faith or frivolous administrative petition under the Florida Administrative Procedure Act? Particularly, how should a court or administrative law judge determine what constitutes a petition brought for an improper purpose? The Friends majority panel opinion, written by Judge Robert Benton, held that Judge Benton’s prior panel opinion in Procacci Commercial Realty, Inc. v. Department of Health and Rehabilitative Services, 690 So. 2d 603 (Fla. 1st DCA 1997), dictates an objective analysis. Conversely, Judge Philip Padovano’s dissent in Friends urged a subjective analysis of the bad faith claims in that case. This article examines the extant case law in trying to ascertain whose view might prevail.
Current Relevant Administrative Statutes
The current Florida APA contains two statutes, F.S. §§120.569(2)(e) and 120.595, which provide for attorneys’ fees awards if an administrative filing is “interposed for improper purposes.” Additionally, common law precedent discussed below indicates that a collateral civil claim for damages is available in extreme cases. While both statutes list nonexclusive examples of improper purposes, neither section explains the standard for determining an improper purpose.
• Friends of Nassau County
In Friends, the Florida First District Court of Appeal squarely faced the issue of how to interpret the APA’s sanctions statute at §120.57(1)(b)5 (now §120.569(2)(e)), addressing actions brought for an “improper purpose.” That statute stated (and in its current version substantially states) that anyone signing a pleading or other filing in an APA matter certifies:
that he or she has read the pleading, motion or other paper and that, to the best of his or her knowledge, information, and belief formed after reasonable inquiry, it is not interposed for any improper purposes, such as to harass or to cause unnecessary delay or for frivolous purpose or needless increase in the cost of litigation. If a pleading, motion, or other paper is signed in violation of these requirements, the hearing officer, upon motion or the officer’s own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay the other party or parties the amount of reasonable expenses incurred because of the filing of the pleading, motion or other paper, including a reasonable attorney’s fee.
The court heard the appeal by a §501(c)(3) corporation, its president and sole director, as well as their lawyers, of an administrative law judge’s sanctions under the above-noted statute. The appellant corporation had opposed a St. Johns River Water Management District permit in the underlying §120.57 (now §120.569) proceeding. The ALJ—and Judge Padovano in dissent—determined that the petitioner, its president, and its lawyers brought the action in bad faith. The majority disagreed and reversed as to the lawyers, agreed as to the petitioner and its president, and remanded to determine appropriate sanctions against the petitioner and its president.
The majority rejected the ALJ’s conclusion that sanctions were appropriate under a subjective bad faith theory. The court noted that one of the law firms representing the petitioner also represented the developer of a nearby proposed shopping mall, which the ALJ found would gain an economic advantage over the applicant because of the delays caused by the administrative action. Nonetheless, the majority held that an objective bad faith standard controlled:
The use of an objective standard creates a requirement to make reasonable inquiry regarding pertinent facts and applicable law. In the absence of “direct evidence of the party’s and counsel’s state of mind, we must examine the circumstantial evidence at hand and ask, objectively, whether an ordinary person standing in the party’s or counsel’s shoes would have prosecuted the claim.”1
The majority found that the applicant failed to show the petitions were objectively meritless, even though they agreed with the ALJ that the action raised serious ethical issues. They determined that sanctions were not appropriate against the lawyers. The court did, however, find sanctions were proper against the corporate petitioner and its sole officer, who admittedly signed the petition her lawyer placed before her without having first reviewed it. That corporate officer was an employee of a law firm that invested in the competing mall.
In writing for the majority, Judge Benton cited to another opinion he wrote, Procacci Commercial Realty v. HRS, 690 So. 2d 603 (Fla. 1st DCA 1997). In Procacci, Judge Benton used an objective analysis of then-extant §120.57(1)(b)10, which authorized an attorneys’ fees award if an appeal of administrative action were “frivolous, meritless, or an abuse of the appellate process.”2 The Procacci court at footnote 9 conducted a lengthy analysis of whether to objectively determine an improper purpose. It cited Mercedes Lighting v. DGS, 560 So. 2d 272, 277–78 (Fla. 1st DCA 1990), which concluded that an objective standard applies.3
Judge Padovano, in dissent, stated the appellants incorporated Friends of Nassau County, Inc.,
for the sole purpose of initiating an administrative action which they knew would be unsupportable at the time of filing. Friends. . . is not a public interest group as the name suggests, but rather it is a corporation comprised of individuals who are business competitors of [the applicant]. The action in question was not brought to assert any legitimate environmental concern, but rather to delay the permitting process long enough to defeat [the applicant’s] opportunity for development. The appellants succeeded in this objective and then they voluntarily dismissed the action.4
Of significance, the majority refused to hold that economic benefit of itself creates grounds for a bad faith claim. It stated that whether a petitioner might derive economic benefit from an administrative challenge is irrelevant if a reasonable person could conclude that the petition had “reasonably clear legal justification.”
One wonders how the majority would address a similar bad faith claim under a Chapter 163 challenge. The Growth Management Act specifically notes that filing made for economic benefit or competitive advantage is brought for an improper purpose. Section 163.3215, for example, addressing development orders, additionally requires the initial complaint to be verified. Would the Friends court still hold that objective determination that a justiciable controversy exists precludes a claim for sanctions against a petitioning economic competitor under §163.3215?
Many practitioners have assumed §163.3215 requires a subjective analysis of the petitioner’s purpose. The improper purpose language in Chapter 163 parallels that in §120.569, and formerly in §120.57. The vehement split between the majority and dissent in Friends means the issue is potentially open—perhaps even in the First District.
Burke v. Harbor Estates Associates, 591 So. 2d 1034 (Fla. 1st DCA 1991), was the first major attorneys’ fees case under the current Florida APA. There, the First District held that determination of an improper purpose under then extant F.S. §120.59(6), governing award of fees for §120.57(1) actions, is generally an issue of fact. The court noted:
The absence of direct evidence of a party’s intent does not convert the issue to a question of law. Indeed, direct evidence of intent may seldom be available. In determining a party’s intent, the finder of fact is entitled to rely upon permissible inferences from all the facts and circumstances of the case and the proceedings before him.5
The above-noted language regarding indirect and circumstantial evidence of “intent” indicates a presumptively objective analysis. The case’s precedential value is enhanced when one examines the statute at issue. The definition of “improper purpose” was substantially the same as that found in today’s §§120.569 and 120.595. It read:
(e) For purpose of this subsection:
1. “Improper purpose” means participation in a proceeding pursuant to Section 120.57(1) primarily to harass or to cause unnecessary delay or for frivolous purpose or to needlessly increase the cost of licensing or securing the approval of an activity.
The Burke court noted: “A frivolous purpose is one which is of little significance or importance in the context of the goal of administrative proceedings. Mercedes Lighting & Electrical Supply, Inc. v. Department of General Services, 560 So. 2d 272, 278 (Fla. 1st DCA 1990).”6 Despite the possibly subjective analysis indicated above, the Burke court’s citation to Mercedes implicitly adopts that court’s objective standard.
A core analysis in determining whether an action is frivolous is whether the claim is counter to settled law. One of the seminal administrative standing cases is instructive. In Agrico v. Department of Environmental Regulation, 406 So. 2d 478 (Fla. 2d DCA 1981), the Second District Court of Appeal held that business competitors claiming economic harm lacked standing under F.S. Ch. 403, which delegated environmental authority to the Department of Environmental Regulation (now the Department of Environmental Protection). The court held that the DER only had jurisdiction to address environmental claims. In pertinent part, the court stated:
Chapter 403 simply was not meant to redress or prevent injuries to competitor’s profit and loss statement. Third-party protestants in a chapter 403 permitting procedure who seek standing must frame their petition for a section 120.57 formal hearing in terms which clearly show injury in fact to interests protected by chapter 403. If their standing is challenged in that hearing by the permit applicant and the protestants are then unable to show that their substantial environmental interests will be affected by the permit grant, the agency must deny standing and proceed on the permit directly with the applicant.7
Agrico has been long relied upon to establish that economic harm cannot support standing in an environmental administrative challenge. Nonetheless, the opinion cannot be fairly read to bar an economic competitor from challenging an environmental permit. Rather, the language cited above shows the court simply requires the economic competitor to show a legitimate environmental injury.
Agrico supports the Friends majority’s ruling that an economic benefit does not automatically render a petition frivolous or in bad faith. The former decision indicates that a competitor may administratively challenge a permit, provided that it has a legitimate basis under the permitting criteria. The competitor must anticipate heightened scrutiny, however, regarding its purpose.
For example, a competitor who challenges a project for deficiencies caused by the competitor might be walking a tightrope. A competitor that challenges a future land use map amendment to the local comprehensive land use plan because of alleged transportation concurrency problems might be acting in good faith. A new project that would further overburden a clogged road might provide sufficient injury in fact. What then, if the concurrency deficit exists because of the objecting competitor’s failure to provide infrastructure pursuant to a development order?
source permit under F.S. Ch. 373 for alleged water quality impacts. That might be a surficially reasonable argument, but what if the objecting competitor’s discharges have led to existing water quality problems? Might the objector face a bad faith claim for trying to compel the applicant to clean up the objector’s mess?
A reviewing ALJ or court must examine the facts to ascertain whether the objector’s challenge is brought for an improper purpose. The Friends court, as buttressed by Agrico, indicates, it is not necessary to examine the objector’s subjective grounds. In fact, the Friends majority implies it is often problematic to determine the subjective basis.
Decisions by the Fifth District Court of Appeal and the Florida Supreme Court regarding collateral damages claims against citizens in administrative proceedings further support Friends and Agrico. In Florida Fern Growers Assn. v. Concerned Citizens of Putnam County, 616 So. 2d 562 (Fla. 5th DCA 1993), the Fifth District applied Londono v. Turkey Creek, 609 So. 2d 14 (Fla. 1992), in addressing an agricultural association’s suit against a citizens’ group’s concerted challenges against water management permits to fern growers. The association claimed the petitioners maliciously and intentionally interfered with its members’ business relationships. The citizens’ group asserted First Amendment rights to petition the government trumped the growers’ claims. While the trial court agreed with the citizens’ group, the appellate court reversed.
The Fern Growers court found that the association alleged a cause of action against the citizens. The association asserted the citizens filed various “sham pleadings” against fern growers’ consumptive water use permits in an attempt to put the fern growers out of business. The court concluded that Londono prohibited an absolute privilege. Rather, the petitioners only enjoyed a qualified First Amendment privilege to petition their government. The privilege would be lost if it were abused. The relevant analysis requires factual review of “the mode, manner or purpose of their communication.” A party may make otherwise defamatory statements to an administrative agency in an otherwise legitimate proceeding and maintain its qualified privilege. Nonetheless, “[E]xtending absolute immunity to such activities would seem to extend to these activities a broader protection than the Constitution itself guarantees. Florida’s Constitution provides that persons ‘shall be responsible for the abuse’ of their free speech rights. Article I, §4, Florida Constitution.”8
The Fern Growers court agreed with Boehm v. American Bankers Ins. Group, Inc., 557 So. 2d 91 (Fla. 3d DCA), rev. denied, 564 So. 2d 1085 (Fla. 1990), that a tortious interference claim is only cognizable if malice is the sole basis for the action.9 This position appears consistent with Friends and Agrico. The court implicitly stated that a petitioner might properly derive a collateral benefit if it prevails, provided there is at least some merit to its stated claim.
The case law indicates that an objective standard applies. A petitioner generally may have an ulterior purpose, provided there is a legitimate claim within the jurisdiction of the agency. The Friends majority, however, apparently found the issue to be a close call there—even under a more lenient objective review.
Left unanswered for now is how a court might review a sanctions claim against a competitor that is found to cause the deficiencies complained of in its petition. For example, as stated above, a competitor whose discharges led to the degraded water quality in a common receiving waterbody may have a surficially valid claim, and thereby claim protection under Friends and Fern Growers. Under those facts, however, that competitor could well be sanctioned for trying to make the applicant pay for the petitioner’s own failure to meet regulatory standards. While the grounds may not be one of the specific examples cited in the statutes, those examples are not exclusive. The petitioning competitor arguably falls within the broad ambit of “improper purposes.”
Further, Burke assumes an objective standard primarily because of the difficulty in ferreting out direct evidence of bad faith. How does an ALJ handle that admittedly unlikely case where a petitioner with a surficially valid claim admits to an ulterior purpose? Friends and Fern Growers might suggest that the admission is irrelevant if there is a jurisdictionally sound, facially valid claim. Nonetheless, one wonders how the ALJ could ignore a blatant admission of underlying improper purpose.
Regardless, all of the reviewing courts acknowledge that improper purpose is an intensely fact specific issue. It may be impossible, as well as imprudent, to try to establish a single bright line test. In most administrative proceedings, the fact finder is in the best position to “know it” when he or she “sees it,” based on the facts and circumstances of the particular matter. q
1 Friends, 25 Fla. L. Weekly D344 (citations omitted).
2 Procacci, 690 So. 2d at 608–09.
3 Id. at 608 n.9.
4 Friends, 25 Fla. L. Weekly D345.
5 Burke, 591 So. 2d at 1037 (emphasis added).
6 Id. at 1037 n.1.
7 Agrico, 406 So. 2d at 482 (emphasis added).
8 Fern Growers, 616 So. 2d at 570.
9 Id. at 570.
Sidney F. Ansbacher practices environmental and land use law in St. Augustine. He is a partner in the firm of Upchurch, Bailey and Upchurch, P.A. He received his B.A. from the University of Florida in 1981, J.D. from Hamline University in 1985, and LL.M. in agricultural law from the University of Arkansas in 1989.
This column is submitted on behalf of the Administrative Law Section, Dan R. Stengle, chair, and Robert C. Downie II, editor.