What Price Frivolity? Section 57.105 Comes to the APA
There are several statutory provisions in the APA providing for awards of attorneys’ fees. An award can be made against a party for participating in a proceeding for an “improper purpose” or for having filed frivolous, harassing, or unnecessary papers or pleadings (F.S. §§120.595(1) and 120.569(2)(e)) or for discovery violations (F.S. §120.569(2)(f)). If an appeal is frivolous or an agency rejects findings of fact of an administrative law judge (ALJ) and that decision is not upheld on appeal, fees will be awarded for the appeal and if findings of fact are erroneously rejected, fees are awarded for the underlying administrative proceeding as well (F.S. §120.595(5)). Fees are awarded to parties who prevail in their challenge to an agency’s proposed or existing rules or statements that should have been adopted as rules (F.S. §120.595(2)-(4)).1 Other attorneys’ fees provisions not contained in the APA also apply to administrative proceedings. Small businesses can be recompensed, at least in part, for attorneys’ fees and costs incurred defending an agency-initiated administrative proceeding that is not “substantially justified” (F.S. §57.111). In 2003, the legislature expanded the scope of F.S. §57.105 to APA proceedings, thereby subjecting parties to paying fees and costs if they advance claims or defenses that are frivolous. This article examines the impact of the change on proceedings held under the APA.
F.S. §57.105 is Applied to the APA
F.S. §57.105 provides for an award of fees for claims or defenses advanced in pleadings that were frivolous when initially filed or which became frivolous at any time before trial.2 This statute became applicable to administrative proceedings in 2003 when a new subsection (5) was added to F.S. §57.105. It provided that fees “and damages” were now available in administrative proceedings “in the same manner and upon the same basis as provided [for in judicial proceedings].”3
Section 57.105 requires that all claims and defenses advanced by the parties must “[be] supported by the material facts necessary to establish the claim or defense,” by the “application of then-existing law to those material facts” or by “a good faith argument for the extension, modification, or reversal of existing law or the establishment of new law, as it applied to the material facts, with a reasonable expectation of success.”4 If the claim or defense ever fails to meet or maintain this standard, a fees award is available.
Courts had earlier determined that the 1999 amendments to F.S. §57.105 evidenced a legislative desire to expand the scope of exposure for fees in civil actions by increasing the scope of the statute’s application to claims that became untenable during litigation even if they were valid when initially proffered. It is clear that the 2003 amendment bringing APA proceedings within the ambit of the statute will have a similar effect on fees exposure in administrative proceedings.
In that regard, F.S. §57.105(5) has the potential to act as a broad deterrent to frivolous pleadings filed by agencies or private parties in administrative proceedings. Because of its open-ended nature, that is, the statute applies without limits to all parties whether private or governmental, it has no monetary cap, and it comes into play at any time during a proceeding. The potential of a claim under F.S. §57.105(5) should be a consideration in any administrative proceeding.
Because F.S. §57.105 has been subject to judicial scrutiny and labor since the 1999 amendments mentioned above, a considerable body of appellate law exists construing and applying the statute’s terms. These decisions provide the framework upon which the application of F.S. §57.105 to administrative proceedings will rest.
Triggering the Application of the Statute and the Availability of “Safe Harbor” Protections
In judicial proceedings, the triggering event that subjects parties to the strictures of F.S. §57.105 is the filing of a complaint or petition with the court. Certain administrative proceedings in which the Division of Administrative Hearings (DOAH) has final order authority, such as rule challenges, commence in the same manner except the initiating document is filed at the DOAH.
In other administrative law contexts, however, the filing of an initiating document, such as an administrative complaint or other enforcement action, a notice of intent to deny or approve a license or permit, or a decision to approve or reject a rate application, does not commence an administrative proceeding. These proceedings are initiated by filing a petition with the agency.
If an agency persists in pursuing the allegations in an administrative complaint or in denying an application after a hearing is requested, then the complaint or the denial notice would appear to constitute a “pleading” for purposes of the statute. Once a proceeding commences, the provisions of F.S. §57.105 attach to the parties and impose the statutory standard of care upon the petitioner and respondent in all of their pleadings, including those created before the proceeding, in a technical sense, began.5
Section 57.105 contains a “safe harbor” provision in subsection (4). This provision gives a pleader a last opportunity to withdraw a frivolous claim or defense or to reconsider a tactic taken primarily for the purpose of unreasonable delay, by permitting the pleader a limited period of time (21 days) within which to withdraw a claim after the opposing party gives written notice of its assertion that the claim is frivolous.6 The notice provisions of the safe harbor must be complied with by the party asserting that a claim is frivolous before an award of fees and costs can be granted.7 But the burden to show that the notice protections contained in the statute were not complied with is on the party defending against such a claim. The protections can be waived if noncompliance is not asserted before the lower tribunal.8
An ALJ may award fees “upon [the ALJs] own initiative.”9 Fee awards under this provision are not subject to the safe harbor notice requirements in F.S. §57.105(4).10
“Claims or Defenses” Subject to the Statute
What constitutes a “claim or defense” within the ambit of F.S. §57.105 is broad. Fees can be awarded for any individual claim or defense that is frivolous even if the remaining claims or defenses are not.11 Moreover, a claim or defense that may give rise to attorneys’ fees sanctions is not limited only to those matters asserted in a petition or administrative complaint. Fees can be awarded on the basis of other assertions, including those made in motions, if the assertions are without a legitimate basis in law or fact.12 Indeed, a claim or defense need not be a part of, and may be ancillary to, the issues that gave rise to the proceeding in order to be subject to a fees award.13
Frivolity Means a “Lack of Justiciable Issues”
To award fees under F.S. §57.105, the ALJ must find the claim was untenable at the time the action commenced or became untenable and, therefore, “lacks a justiciable issue” because of information adduced or events that occurred during the course of the proceedings.14 The test for determining whether a factual claim or a legal proposition “lacks a justiciable issue” is whether the losing party or the losing party’s attorney knew or should have known that a claim or defense, when initially presented or at any time before the hearing, was completely unsupported by the facts or the law.15
In Visoly v. Security Pacific Credit Corp., 768 So. 2d 482, 491 (Fla. 3d DCA 2000), the court advanced a set of guidelines that can be used in determining when a claim or defense is factually or legally unsupported. Under the guidelines, frivolous claims a) are completely without merit in law and cannot be supported by a reasonable argument for an extension, modification, or reversal of existing law; b) are contradicted by overwhelming evidence; c) are undertaken primarily to delay or prolong the resolution of the litigation, or to harass or to maliciously injure another; or d) assert material factual statements that are false.
A complete lack of justiciable factual issues includes reliance on false affidavits,16 or false claims of insufficient contacts justifying long arm jurisdiction.17 Other examples include persisting in litigation when there are no facts upon which a complaint against a party could be justified;18 having no evidence at all but only hypothesized wrongful conduct;19 filing a factually baseless complaint in hope of obtaining quick settlement.20 Moreover, courts have held that the factual basis that justifies filing or persisting in a claim must be grounded in evidence that is “admissible at trial.”21
Legally baseless claims include those that are based on deficient legal assertions.22 Legally baseless claims also occur when the tribunal has already resolved the issue and a party persists in advancing it.23
However, simply because it ultimately turns out that a party cannot prevail upon its claims in a summary decision does not mean that fees are automatically awardable.24 Thus, suing a party that is subsequently determined to have no interest in the subject matter of the litigation does not subject the plaintiff to the sanctions of F.S. §57.105 fees so long as sufficient factual indicia exist to justify commencing the proceedings or their continuation.25 But if a claim under F.S. §57.105 is made, the court must make “an inquiry into what the losing party knew or should have known during the fact-establishment process, both before and after suit is filed.”26
Specific Findings Must Be Made in an Order Awarding Fees
Finally, the decision that a claim is “frivolous” cannot be conclusory. An ALJ must carefully explain and justify an attorneys’ fee award.27 Failure on the part of the ALJ to make adequate findings justifying a fees award mandates reversal.28
Application of F.S. §57.105 to Non-DOAH Proceedings
It appears that the plain text of F.S. §57.105(5) does not limit its application only to administrative proceedings conducted by DOAH. To be sure, the statute requires that an ALJ must decide a motion for fees filed under F.S. §57.105, not the agency, and courts have so held, as in Jain v. Florida Agr. and Mechanical University, 914 So. 2d 998 (Fla. 1st DCA 2005). The requirement that an ALJ must dispose of an F.S. §57.105 claim, however, does not compel the conclusion that the statute applies only to DOAH proceedings.
On its face, the statute encompasses all “administrative proceedings under Chapter 120.” This language makes it plain that it was the legislative intent to punish frivolous claims in all quasijudicial APA proceedings.
French v. Department of Children and Families, 920 So. 2d 671 (Fla. 1st DCA 2006), provides guidance as to how a court would construe the scope of F.S. §57.105. In French, the court rejected the argument of the Department of Children and Families that the agency was not subject to a fees claim under F.S. §120.595(1) when it conducted a hearing using agency hearing officers. Because F.S. §120.595(1) granted only ALJs the authority to award fees for participating in a proceeding for an improper purpose, DCF reasoned that the agency was not subject to a fees claim for its actions because it did not use DOAH to conduct the proceeding.
The court rejected this argument. It held that although the agency was exempt from using DOAH to conduct the specific hearing in question it was not exempt from the remainder of the APA. Since F.S. §120.595(1) was a clear statutory sanction for improper conduct in administrative “proceedings,” just as is F.S. §57.105, the court concluded that accepting the agency’s argument would negate the terms of the statute. The court then ordered that an ALJ resolve the merits of the fees claim even though the underlying case was not at DOAH.29
The same reasoning should apply to determining the scope of the application of F.S. §57.105(5). As the court in French concluded, just because only ALJs can decide the merits of a fees claim made under the APA does not mean that the statute only applies to hearings held at DOAH.
Both the terms of the statute and the policy underlying F.S. §57.105 seem to mandate such a result. The legislature’s intent in enacting F.S. §57.105(5) was to discourage the initiation or continuation of administrative proceedings which were not reasonably grounded in fact or the law. It would, therefore, be irrational if the provisions of F.S. §57.105 did not apply to the broad universe of APA proceedings which take place outside DOAH. Agencies conduct numerous types of quasijudicial administrative proceedings under the APA outside of DOAH. The same kind of abuses that F.S. §57.105 proscribes takes place in administrative proceedings both inside DOAH and outside DOAH.
Agencies enter final orders after the entry of a recommended order by an ALJ and in doing so must rule on exceptions and responses to the exceptions. Agencies must rule on requests for stays, motions for disqualification, and various other claims by parties. Indeed, some agencies are authorized to conduct formal hearings under various exemptions from the general APA requirement that formal hearings be conducted by ALJs. All agencies conduct “informal hearings” under F.S. §120.57(2). During such hearings motions are filed, claims are made, and defenses are proffered.
Virtually all agencies can issue declaratory statements as provided in F.S. §120.565. When they do so, the agency necessarily rules on the sufficiency of petitions, responses, and motions, and if necessary, conducts fact-finding hearings.30 In each of these proceedings, F.S. §57.105 has an obvious utility as a check on frivolous actions by the parties. Plainly, agencies conduct many administrative proceedings which are quasijudicial in nature and are not presided over by an ALJ, but which still almost certainly fall within the ambit of F.S. §57.105(5).
Comparing F.S. §57.105 and other APA Attorneys’ Fees Sanctions
The availability of F.S. §57.105 sanctions to a party in an administrative proceeding is not a small matter. Fees can be awarded to any party without any limitation on the amount. In this sense, the availability of F.S. §57.105 is a stronger sanction against agencies than is the “Florida Equal Access to Justice Act.”31 There is no need to show that one is a small business party. Fees awards are not limited to $50,000. An agency is not excused for a claim that is later found to be frivolous if it shows that the claim was “substantially justified” at the outset.
The application of F.S. §57.105 to administrative proceedings has also effectively expanded the “improper purpose” fees sanctions authorized in F.S. §120.569(2)(e). That statute mandates an award of fees when a party files a paper for “improper purposes, such as to harass or to cause unnecessary delay, or for frivolous purpose or needless increase in the cost of litigation.”
In order for a “frivolous purpose” to be found under F.S. §120.569(2)(e), courts have held that a party must have filed the paper without a “reasonably clear legal justification.” Examples include “excessive persistence in pursuing a claim or defense in the face of repeated adverse rulings, or by obdurate resistance out of proportion to the amounts or issues at stake.” Thus, a frivolous act under F.S. §120.569(2)(e) is an act that does not meaningfully advance the goal of the proceedings.32
An “improper purpose” under F.S. §120.569(2)(e) is not shown just because a party asserts a position that is not “well grounded in fact. ..” or is not “warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.”33 Those standards apply only to claims under F.S. §57.105.
Because of the broader scope of F.S. §57.105, it is hard to see how frivolous claims that fall within the ambit of F.S. §120.569(2)(e) will not also fall within the scope of F.S. §57.105. As a result, it will be the rare case where such a claim of participation for an “improper purpose” is not subsumed in a claim for violating F.S. §57.105.
1 Prior to 2003, these provisions existed in other parts of Ch. 120. The references are to the 2007 statutes.
2 The statute additionally provides that fees and “damages” can also be awarded for pleadings that are determined to have been filed for delay or harassment.
3 The “damages” that are referenced in the statute refer to the provisions of subsection 57.105(3). That subsection was enacted to provide a sanction for parties who could prove that an opposing party had filed papers “for the purpose of unreasonable delay.” The sanction, which must be imposed upon such a finding, is defined as “damages” in the form of “reasonable expenses incurred in obtaining the order, which may include attorneys’ fees, and other loss resulting from the improper delay.”
4 Fla. Stat. §57.105(1)-(2).
5 And maybe even earlier. One court has intimated that the filing of a sworn citizen complaint with an agency can give rise to a F.S. § 57.105 claim against the complainant if the sworn complaint is found to be frivolous when it held the complainant liable for costs and fees for filing an ethics complaint for an improper purpose (i.e., malicious intent to injure the reputation of the officer or employee complained about with knowledge or with reckless disregard that the complaint contained material false allegations. Osborne v. Commission on Ethics, 9516
7 O’Daniel v. Board of Commissioners of Monroe County, 916 So. 2d 40 (Fla. 3d D.C.A. 2005).
8 Department of Revenue v. Yambert, 883 So. 2d 881, 884 n. 3 (Fla. 5th D.C.A. 2004).
9 Fla. Stat. §57.105(1).
10 Schmigel v. Cumbie Concrete Co., 915 So. 2d 776 (Fla. 1st D.C.A. 2005).
11 Yakavonis v. Dolphin Petroleum, Inc., 934 So. 2d 615, 619 (Fla. 4th D.C.A. 2006) (fees recoverable for any claim or defense that is unsupported).
12 Barthlow v. Jett, 930 So. 2d 739 (Fla. 1st D.C.A. 2006) (meritless motion for default subject to Fla. Stat. §57.105 fees award).
13 Albritton v. Ferrara, 913 So. 2d 5 (Fla. 1st D.C.A. 2005) (fees awarded for meritless motion seeking Fla. Stat. §57.105 fees filed by opposing party).
14 See Zweibach v. Gordimer, 884 So. 2d 244 (Fla. 2d D.C.A. 2004) (fee award based on judgment on the pleadings entered after effort to avoid statute of limitations); Mook v. Mook, 873 So. 2d 363 (Fla. 2d D.C.A. 2004); Weatherby Associates, Inc. v. Ballack, 783 So. 2d 1138 (Fla. 4th D.C.A. 2001) (suit to enforce noncompete contract which was reasonable at outset became unreasonable after plaintiff admitted that it had no evidence of liability at completion of discovery).
15 Boca Burger Inc. v. Forum, 912 So. 2d 561, 570 (Fla. 2005).
20 Smith v. Viragen, 902 So. 2d 187 (Fla. 3d D.C.A. 2005).
21 Albritton v. Ferrara, 913 So. 2d at 8.
23 Stok v. Moller, 888 So. 2d 132 (Fla. 3d D.C.A. 2004) (pursuit of motion after stipulation was legally untenable).
27 Mason v. Highlands County Bd. of County Com’rs, 817 So. 2d 922, 923 (Fla. 2d D.C.A. 2002) (Fla. Stat. §57.105 fees may not be awarded absent competent substantial evidence of a complete absence of a justiciable claim of fact or law); Sutton v. LeBeau, 912 So. 2d 327 (Fla. 2d D.C.A. 2005); In Re Forfeiture of 1997 Jeep Cherokee, 898 So. 2d 223 (Fla. 2d D.C.A. 2005); Goldberg v. Watts, 864 So. 2d 59, 60 (Fla. 2d D.C.A. 2003) (persuasive explanation needed to justify sanction of Fla. Stat. §57.105 fee award); Cooke v. Custom Crete of Southwest Fla., Inc., 833 So. 2d 315, 316 (Fla. 2d D.C.A. 2003) (denial by defendant without “definitive evidence” of noninvolvement held insufficient to support Fla. Stat. §57.105 attorneys’ fees award).
28 Boca Burger, 912 So. 2d 561, 570 (Fla. 2005); Sher v. Countrywide Home Loans, Inc., 848 So. 2d 1246 (Fla. 4th D.C.A. 2003).
29 On March 28, 2007, a DOAH final order was entered in the fees proceeding ordered by the court in French. The ALJ found that the F.S. §120.595 “improper purpose” claims filed by both parties were not supported by the facts. The ALJ also denied F.S. §57.105 claims by both parties because of the failure of both parties to comply with the notice requirements of F.S. §57.105(4). Lastly, the ALJ declined to award fees on an ALJ’s own authority. French v. Agency for Persons with Disabilities, DOAH Case No. 06-4565F.
30 Adventist Health System/Sunbelt, Inc. v. AHCA, 955 So. 2d 1173, 1176 (Fla. 1st D.C.A. 2007), citing Fla. Admin. Code R. 28-105.003) (“The agency may hold a hearing to consider the petition for declaratory statement.”).
31 Fla. Stat. §57.111.
John Rimes is a sole practitioner in Tallahassee and is also prosecuting attorney for the Florida Board of Professional Engineers. He has over 30 years of practice as lead trial and appellate counsel in all state and federal courts and administrative tribunals and as general counsel to various state regulatory boards. He is a co-author of Florida Administrative Practice, 8th ed.
This column is submitted on behalf of the Administrative Law Section, James A. Bertron, Jr., chair, and Deborah K. Kearney, editor.