October 6, 2011

Florida Capital Update: October 2011

Holland & Knight Update
Eddie Williams III

Capital Policy Making

Florida Fiscal Analysis

The fiscal analysis for 2011 and long-range financial outlook for Florida has been released as the Legislature makes preparations for another appropriations round. Fiscal Analysis In BriefLong-Range Financial Outlook 2010 - 2014

Senate 2011-12 Interim Reports Released

The Florida Senate has released a series of 2011-12 interim work program reports and summaries with titles such as the following:

  • Local and Organic Food Production
  • Personal Injury Protection (PIP)
  • Citizens Property Insurance
  • Open Government Sunset Review (of various statutes)
  • Report on the Impact of the General Appropriations Act on Pre-K-12 Education
  • Review of The Capital Investment Tax Credit
  • Excise Tax on Other Tobacco Products
  • Property Tax Update
  • Forensic Mental Health System
  • Crisis Stabilization Units
  • Report on the Impact of the General Appropriations Public Post-Secondary Education
  • Cost Effectiveness of Regional Expressway and Bridge Authorities
  • Review Federal Fostering Connections Implementation in Florida
  • Examine Florida TaxWatch Proposal to Reduce Lengths of Stay in Department of Juvenile Justice Commitment Facilities
  • Land Application of Septage from Onsite Sewage Treatment and Disposal Systems
  • Review Eligibility of Dentist Licensure in Florida and Other Jurisdictions
  • Referrals Between Health Care Providers in Delivery of Radiation Therapy Services
  • Expanding Florida’s role in the Space Industry
  • Florida Transit Systems Overview and Funding


Capital Courts

National Franchisor Not Liable for the Fraudulent Actions of an Affiliate of a Franchisee

In Jackson Hewitt, Inc., v. Kaman, Case No. 2D10-1801 (Fla. 2nd DCA Sept. 9, 2011), Jackson Hewitt, asked the court to determine whether it could be held liable to investors that were defrauded by an affiliate of one of its franchisees. The Florida Second District Court of Appeal concluded that Jackson Hewitt could not be held liable to the investors based on the facts presented in the case.

The investors lost a substantial sum of money in a fraudulent real estate investment scheme promoted by an affiliate of a Jackson Hewitt Tax Service franchisee. The affiliate company shared office space with the Jackson Hewitt franchisee and one of the officers of the affiliate was also an officer of the franchisee. The investors alleged that Jackson Hewitt was liable based on the theories of negligence and apparent agency. However, on the claim for negligence, the court held that the investors failed to establish that Jackson Hewitt owed a duty to the investors to prevent the actions of the officer and the affiliate which caused the investors’ financial losses. The court stated that the investors’ position was at odds with the general common law rule “that there is no duty to prevent the misconduct of third parties.” Michael & Philip, Inc. v. Sierra, 776 So.2d 294, 297 (Fla. 4th DCA 2000). The court reasoned that Jackson Hewitt had no special relationship with the investors or others to protect them from the misconduct of third parties and no special relationship with the third parties which would have required it to control their conduct.

With regard to the apparent agency claim, the court stated that “[i]n order to establish a claim based on apparent agency, three elements must be proven: (a) a representation by the purported principal, (b) a reliance on that representation by a third party, and (c) a change in position by the third party in reliance on the representation. Mobil Oil Corp. v. Bransford, 648 So.2d 119, 121 (Fla. 1995). The court held that the investors failed to prove either a representation by Jackson Hewitt concerning the affiliate’s status as its agent or that the investors had relied on any such representation. Thus, the court concluded that the investors failed to prove that the affiliate was the agent of Jackson Hewitt.

Judge Declares Legislative Attempt to Mandate Privatization of 29 Existing State Prisons Through Proviso in the General Appropriations Act Unconstitutional

In Baiardi v. Tucker, Case No. 2011 CA 1838 (Fla. 2d Cir. Ct. Sept. 30, 2011), a circuit court in the Second Judicial Circuit held that the appropriations act “proviso, which mandates that the [Florida] D[epartment] o[f] C[orrections] privatize numerous facilities in a single procurement, is unconstitutional under Art[icle] III, Sections 6 and 12 of the Florida Constitution.” The court noted that under current law, the Department of Corrections (DOC) may enter into contracts with private vendors for the operation of private prisons. § 944.105, Fla. Stat. (2010). But, the Florida Statutes require that specific conditions be met and specific procedures followed. See §§ 944.105, 287.057(b)(1), 287.0571, 287.001, 216.023, 216.023(4)(a), & 216.023(4)(b), Fla. Stat. (2010).

At issue in this case was whether the proviso language adopted as part of the General Appropriations Act during the 2011 Legislative Session, that purported to create an alternate procedure for prison privatization, was valid. The court found that it was not, and held that the Legislature had improperly “bypassed the very safeguards it built into the process that DOC is required to follow when DOC initiates privatization pursuant to substantive law.” Rejecting this attempt to set public policy via proviso, the court held that “if it is the will of the Legislature to itself initiate privatization of Florida prisons, as opposed to DOC, the Legislature must do so by general law, rather than ‘using the hidden recesses of the General Appropriations Act.’”(quoting Dickinson v. Stone, 251 So. 2d 268, 273 (Fla. 1971)).

Supreme Court of Florida Revises Oath of Admission to The Florida Bar

The Florida Supreme Court revised the oath of attorney administered to new members of The Florida Bar in order to acknowledge “[t]he necessity for civility in the inherently contentious setting of the adversary process.” In re: Oath of Admission to the Florida Bar, SC 11-1702 (Fla. Sept. 12, 2011), quoting, In re Snyder, 472 U.S. 634, 647 (1985). As justification, the Court said there was a need to address increasing acts of incivility among members of the legal profession. The Court adopted the pledge of the South Carolina Bar: “To opposing parties and their counsel, I pledge fairness, integrity, and civility, not only in court, but also in all written and oral communications.” S.C. App. Ct. R. 402(k)(3).

Amendment Requiring Counties to Pay Costs Related to the Offices of Criminal Conflict and Civil Regional Counsel Was an Unconstitutional, Unfunded Mandate

In Lewis v. Leon County, No. SC09-1698 (Fla. Sept. 22, 2011), the Florida Supreme Court decided that section 19 of chapter 2007-62, Laws of Florida, unconstitutionally shifted the state’s responsibility for funding certain costs of court-appointed counsel from the state to the counties in violation of Article V, section 14 of the Florida Constitution. In 2007, the Legislature enacted chapter 2007-62, Laws of Florida, which created a new system of court-appointed counsel to represent indigent defendants, primarily in cases in which the public defender has a conflict of interest. Crist v. Fla<. Ass’n of Criminal Def. Lawyers, 978 So. 2d 134, 137 (Fla. 2008). Offices of Criminal Conflict and Civil Regional Counsel (RCC) were established under this new system. The RCC consists of five offices located within the geographic boundaries of each of the five district courts of appeal. The Act required courts to appoint counsel from the RCC when the public defender has a conflict of interest.

Section 19 of the Act amended section 29.008, Florida Statutes, to include the RCC within the term “public defenders’ offices.” As a result, the Legislature made Article V, section 14(c) of the Florida Constitution applicable to the RCC and “effectively mandated that counties pay certain constitutionally-defined costs to house the offices of both the public defender and the RCC.” Lewis v. Leon County, 15 So. 3d 777, 779 (Fla. 1st DCA 2009). The Court concluded that the plain language of Article V, section 14 provides that the responsibility for funding the RCC belongs to the State. The Court stated that the constitutional provision approved by the voters only required the counties to pay overhead costs for the offices enumerated in the provision, which did not include the RCC. The Court also likened the RCC to private court-appointed counsel, rather than to the public defenders’ offices. Consequently, the Court held that RCC counsel are not public defenders and do not perform the constitutional duties of public defenders. Finally, the Court noted that by redefining through a statute what entities are included in the offices listed in section 14(c), the statute effectively amended the constitution without voter approval.

Statute Authorizing the Permanent Revocation of a Teacher’s Educator Certificate Cannot Be Applied Retroactively

In Presmy v. Smith, Commission of Education, 36 Fla. L. Weekly D5202a (Fla. 1st DCA September 16, 2011), the First District Court of Appeal ruled that a statute authorizing the Commission of Education permanently to revoke a teacher’s educator certificate could not be applied retroactively. In 2006, Mr. Presmy, a certified teacher, was involved in an incident at school that resulted in a criminal proceeding. Mr. Presmy pled guilty to misdemeanor battery on a minor. Subsequently, the West Palm Beach County School Board voted to suspend Mr. Presmy and initiated dismissal proceedings. Mr. Presmy challenged the Board’s decision before the Commission. In its final order, the Commission adopted the findings of the administrative law judge (ALJ) that Mr. Presmy did not violate either the code of ethics or principle of professional conduct. Therefore, Mr. Presmy was reinstated to his position with the school district.

In 2008, the Legislature amended section 1012.795(1)(n), Florida Statutes, mandating that the Commission permanently revoke the educator certificate of any teacher convicted of misdemeanor battery on a minor. Pursuant to this legislation, the Commission began proceedings to permanently revoke Mr. Presmy’s educator certificate, based on the previous battery conviction. After two hearings, the Commission entered a final order adopting the ALJ’s recommendation that Mr. Presmy’s educator certificate be permanently revoked. To decide whether to apply amended section 1012.795(1)(n) retroactively, the court followed the two-pronged test adopted by the Florida Supreme Court to “ascertain (1) whether the Legislature clearly expressed its intent that the statute have retroactive application; and if so, (2) whether retroactive application would violate any constitutional principles.” Old Port Cove Holdings, Inc. v. Old Port Cove Condo. Ass’n One, 986 So. 2d 1279, 1284 (Fla. 2008) (quotation omitted). Applying this test, the court concluded that the Legislature did not clearly express an intent that the statute apply retroactively and that the retroactive application of the statute would impair a vested property interest that Mr. Presmy had in his educator certificate.

Capital Rules and Variances

Assisted Living Facilities and Related Regulations Under Scrutiny

In September 2011, the Florida Senate issued Interim Report 2012-128, titled “Review Regulatory Oversight of Assisted Living Facilities in Florida.” According to the report, there are 2,956 assisted living facilities (ALFs) that are licensed by Florida’s Agency for Health Care Administration and subject to Department of Elder Affairs rules. The Department of Children and Families and the Department of Health also consult on the rules. http://www.flsenate.gov/PublishedContent/Session/2012/InterimReports/2012-128hr.pdf

Despite this regulation, the Miami Herald, published a three-part series in April 2011, discussing its year-long investigation into abuses allegedly occurring in ALFs, along with the state regulatory response. Neglected to Death, Parts 1-3, available at: http://www.miamiherald.com/news/special-reports/neglected-to-death/article1938076.html

In response, Governor Rick Scott formed a 14-member ALF task force to hear from interested parties and make recommendations for legislative action. The task force’s report is due in November 2011.

Until the Legislature is able to consider the work group’s recommendations, Senate staffers recommend that the Legislature designate a specific state agency as the lead agency to coordinate ALF-related complaints and problems. Senate staff members also recommend implementation of a rating system, similar to the one currently used for nursing homes, to help consumers make informed choices when selecting an ALF.

Department of Revenue to Hold Rule Development Workshop on the Taxability of Leasehold Improvements

The Department of Revenue held a rule development workshop on September 21, 2011, to consider amending its rules to address the taxability of leasehold improvements as rent in light of a ruling contrary to the Department’s historical position that amounts spent by a tenant for any leasehold improvement required under the lease are subject to sales tax as “rent” paid by the tenant. See Department of Revenue vs. Ruehl No. 925, LLC, Case No. 09-CA-1503 (Leon County). Given the substantial amounts often expended by tenants for leasehold improvements, this can be an issue of substantial impact on lessors and lessees in the state.

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