STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LEARNED ENGINEERING AND DEVELOPMENT ) INC., AND ARTHUR LEARNED, PRESIDENT, )

)

Petitioners, )

)

vs. ) CASE NO. 86-3950F

)

DEPARTMENT OF ENVIRONMENTAL )

REGULATION, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on December 19, 1989, in Tallahassee, Florida. The issue for determination in this proceeding is whether petitioner is a prevailing small business party entitled to an award of attorney's fees and costs.

APPEARANCES

For Petitioner: Martha J. Edenfield, Esquire

Oertel, Hoffman, Fernandez & Cole, P.A. 2700 Blairstone Road

Tallahassee, Florida 32314-6507

For Respondent: Agusta P. Posner, Esquire

Assistant General Counsel 2600 Blairstone Road

Tallahassee, Florida 32399-2400 INTRODUCTION

In support of its claim for attorney's fees and costs as a prevailing small business party, petitioner presented the testimony of Arthur Learned, President of Learned Engineering and Development, Inc. Petitioner's Exhibits 1 * received into evidence.

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  The respondent, Department of Environmental Regulation (DER), presented the testimony of Langley exhibits 1 through 18 and 20 through 23 were received.

  
  

  Subsequent to the hearing, counsel submitted proposed findings of fact and proposed consolidations of law. The parties' proposed factual findings *

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  and/or incorporated in this Final Order, *

  
  

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  Appendix hereto.

  
  

  FINDINGS OF FACT

  
  

  1. Upon consideration of the oral argument adduced at the hearing, the following relevant facts:

     
     

  2. In November of 1983, the Captiva Erosion Prevention District (CEPD) submitted an application from the DER to construct an experimental "on-site stabilization system along 650 feet of Captiva Erosion Prevention District. The application listed Petitioner Arthur Learned, president, Learned Engineering and Development, Inc. as authorized agent. Drawings attached to the application show a location plan, a site plan and a plat. Each drawing is on Learned Engineering and Development, Inc. letterhead and is signed by Arthur Learned. The application noted that the project was "ex*

     
     

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  judged harmful, can be undone."

  
  

  3. A Joint U. S. Army Corps of Engineers Permit Application Appraisal was performed*

  
  

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this ACCESS document.

limitations of authority of resident project representative." Petitioner notes in a letter to the CEPD that said duties are in addition to those normally provided by the Engineer as Owner's representative during construction. Among the listing of the duties of a Resident Project Representative (RPR) is a provision which states that

through more extensive on-site observations of the Work in progress and field checks of materials and equipment by the RPR and assistants, ENGINEER shall endeavor to provide further protection for OWNER against defects and deficiencies in the Work; but the furnishing of such services will not make ENGINEER responsible for or give ENGINEER

control over construction means, methods, techniques, sequences or procedures or for safety precautions or programs, or responsibility for CONTRACT0R's failure to perform the Work in accordance with the Contract Documents.

1. At some point in February of 1986, the DER discovered that concrete had been used in a portion of the stabilizers. Petitioner met with the DER staff concerning this permit violation, and explained that concrete, rather than sand, was placed in the bags due to changed conditions. Petitioner was told that any change in design needed approval from the DER.

   
   

2. By letter dated February 28, 1986, Petitioner requested a modification of the permit to include the substitution of concrete intersection as stabilizer tie-in and filler. The after-the-fact permit modification was granted by letter dated May 26, 1986, addressed to the petitioner. The modification allowed the use of concrete-filled bags to construct the most landward portion of the six permitted groins to a maximum length of 13 feet from the landward connection.

   It did not permit concrete bags beyond the 13 foot distance.

   
   

3. On or about March 6, 1986, petitioner completed a Certificate of Substantial Completion for the Sand Core Filter Beach Stabilizers, indicating the date of substantial completion to be February 16, 1986.

   
   

4. Prior to the modification authorized on May 26, 1986, the petitioner received a letter from DER dated March 24, 1986. This letter notified Mr. Learned that the permit did not authorize placement of concrete within the permitted sand bags, and that, in order to correct the outstanding violations, the concrete material must be removed from the sand bags. Petitioner was request to remove all sand bags that contained cement within fourteen days.

   
   

5. Based upon DER's prior correspondence with petitioner Learned during the permitting process, as well as its investigation, on-site inspections, meetings, telephone conversations and a sworn affidavit from the Chairman of the CEPD regarding the CEPD's lack of knowledge of noncompliance with the conditions of a similar Department of Natural Resources' permit, DER staff believed that petitioner Learned (along with the contractor) was the responsible party in the decision to use concrete in the sand bags and that the CEPD relied upon the petitioner and the contractor to adhere to permit conditions. The DER did not review the contract documents regarding petitioner's services to the CEPD prior to instituting proceedings against the petitioner.

   
   

6. On August 5, 1986, the DER issued a Notice of Violation and Orders for Corrective Action against Erosion Control Systems, Inc. and Learned Engineering and Development, Inc. The Findings of Fact contained therein recite that Learned Engineering and Development, Inc. and Erosion Control Systems, Inc. are the agent and contractor respectively for the CEPD. Violations of Chapter 403 were found and specific corrective actions were proposed. The corrective action to be taken was the removal of all concrete bags waterward of the 13 foot mark, the refilling of said bags with sand, the removal of any bags containing asphalt and the return of all disturbed areas to pre-removal conditions. Learned Engineering and Erosion Control Systems were also to make payment to the DER in the amount of $392.60 for expenses incurred in investigating the matter.

   
   

7. On March 16, 1987, DER issued an Amended Notice of Violation and Orders for Corrective Action. This document named the Captiva Erosion

   Prevention District, Erosion Control Systems, Inc. and Learned Engineering and Development, Inc. as respondents, and noted that CEPD was the permittee, that petitioner Learned was the authorized agent on the project for CEPD and that Erosion Control Systems was the project contractor employed by CEPD. The Amended Notice is substantially similar to the initial Notice, but adds a further violation regarding the use of turbidity curtains during construction. It also adds a Count charging that Respondents Learned and Erosion Control conducted dredging and filling activities without a valid DER permit. The Orders for Corrective Action are identical to the initial Notice.

   
   

8. DER subsequently resolved its dispute with the CEPD and, on March 11, 1988, filed a Notice of Voluntary Dismissal as to Erosion Control Systems and petitioner Learned Engineering.

   
   

9. At the time of the initial Notice Of Violation and Orders for Corrective Action, petitioner was a for-profit corporation under the laws of Florida with its principal place of business in Venice, Florida. Due to financial difficulties caused, at least in part, by the DER's actions in the enforcement proceeding described above, Arthur Learned, President of Learned Engineering, closed the Florida office, semi-retired and moved to Georgia. Learned Engineering relocated to Georgia on January 1, 1987, and now has its principal place of business in Blairsville, Georgia. It does still maintain contacts in Florida and has recently performed other work in Florida.

   
   

10. At all relevant times, Petitioner has had less than 25 employees and a net worth of less than $2,000,000.00.

    
    

11. Petitioner incurred attorney's fees and costs in the amount of

    $5,127.07 in defense of the administrative proceedings described above.

    
    

    CONCLUSIONS OF LAW

    
    

12. This case arises under the Florida Equal Access to Justice Act,

    Section 57.111, Florida Statutes. The stated purpose of this Act

    
    

    to diminish the deterrent effect of seeking review of, or defending against, governmental actions by providing in certain situations an award of attorney's fees and costs against the state. Section 57.111(2), Florida Statutes.

    
    

    The Florida Act is patterned after a federal law on the same subject -- the Federal Equal Access to Justice Act, 5 U.S.C. Section 504. As such, the Florida Act takes the same construction as its prototype has been given in the federal courts insofar as such construction is harmonious with the spirit and policy of the Florida legislation on the subject. Pasco Count School Board v. Florida Public Employees Relations Commission, 353 So.2d 108 (Fla. 1st DCA, 1977).

13. In pertinent part, the Florida Act provides that Unless otherwise provided by law, an award

    of attorney's fees and costs shall be made

    to a prevailing small business party in any adjudicatory proceeding or administrative proceeding pursuant to chapter 120 initiated

    by a state agency, unless the actions of the agency were substantially justified or special circumstances exist which would made the award unjust. Section 57.111(4)(a), Florida Statutes.

    
    

    Thus, the pertinent inquiries are (1) whether petitioner is a prevailing small business party and (2) whether the actions of the Department of Environmental Regulation were substantially justified or special circumstances exist which would make an award of attorney's fees and costs unjust.

    
    

14. A party petitioning for attorney's fees and costs bears the initial burden of proving that it is a small business party, that it prevailed and that the underlying adjudicatory proceeding was initiated by a state agency. Once this burden has been met, the burden shifts to the state agency to demonstrate that its actions were substantially justified or that special circumstances exist which would make an award unjust. This latter burden is based upon the rationale that it is the agency which is the party best able to know the factual and legal basis of its prior actions, and whether special circumstances exist which would make an award unjust. Gentele v. Department of Professional Regulation, Board of Optometry, 9 FALR 310, 327 (June 20, 1986), affirmed on other basis at 513 So.2d 672 (Fla. 1st DCA, 1987).

    
    

15. A small business party is considered to have "prevailed" when the state agency has sought a voluntary dismissal of its action against that party. Section 57.111(3)(c), Florida Statutes. The parties have stipulated and the evidence demonstrates that the DER filed a Notice of Voluntary Dismissal of its case against petitioner Learned Engineering in March of 1988.

    
    

16. As applicable to this case, a "small business party" is a partnership or corporation

    
    

    which has its principal office in this state and has at the time the action is initiated by a state agency not more than 25 full-time employees or a net worth of not more than $2 million. Section 57.111(3)(d)b,

    Florida Statutes.

    
    

    The evidence establishes that petitioner Learned Engineering and Development, Inc. is a corporation which, at all pertinent times, has had less than 25 full- time employees and a net worth of less than $2 million. The dispute in this case, and the basis for DER's pre-hearing Motion to Dismiss, is whether petitioner meets the requirement of having its principal office in this state. Because of the placement of the phrase "and has at the time the action is initiated by a state agency" within the above-cited statutory provision, DER contends that petitioner is not a small business party since it moved its place of business from Florida prior to the commencement of this action. The case of ch Electronics, Inc. v. Southern Bell, 523 So.2d 670 (Fla. 3rd DCA, 1988) is cited for the proposition that relative and qualifying phrases are to be construed as referring to the nearest antecedent. It is the position of the DER that if a corporation moves its place of business from Florida during the pendency of the initial agency action or prior to initiating a petition for recovery of attorney's fees and costs, it loses its status as a "small business party" within the meaning of the Florida Equal Access to Justice Act.

17. At first blush, the statutory construction urged by DER is appealing. However, it is well settled that when interpreting provisions of a statute, legislative intent is the pole star by which construction must be guided. Wakulla County v. Davis, 395 So.2d 540 (Fla. 1951). A construction which leads to a result obviously not intended by the Legislature should be avoided. City of St. Petersburg v. Seibold, 48 So.2d 291 (Fla. 1950). Going back to the legislative intent clearly expressed in Section 57.111(2), the concern was that small businesses not be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense involved in doing so. The solution intended was to diminish that deterrent effect by providing an award of attorney's fees and costs against the state. It would seem incongruous that the legislature would provide for fees and costs to be awarded to prevailing businesses which were "small" at the time of the initial governmental action, but grew to "large" (i.e., more than 25 employees and more than a $2 million net worth) at the time of filing a petition for attorney's fees and costs, and not allow the same opportunity to a prevailing small business which had its principal place of business in Florida at the time of the initial state action but subsequently moved from Florida. This is particularly true where, as in this case, the move was occasioned by semi-retirement and, at least in part, by the financial stress caused by the initiation of the very action for which petitioner now seeks attorney's fees and costs. It was surely not the legislative intent to run businesses out of Florida through unreasonable or unjustified governmental harassment. In summary, it is concluded that petitioner qualifies as a "prevailing small business party" by having its principal place of business in Florida at the time DER initiated action (the initial Notice of Violation and Orders for Corrective Action) against it. DER's Motion to Dismiss on that basis is accordingly denied.

    
    

18. Petitioner having established that it is a "prevailing small business party," the burden shifted to DER to establish either that its actions were substantially justified or that special circumstances exist which would make an award of attorney's fees and costs unjust. DER offered no evidence of special circumstances, but the issue of substantial justification remains.

    
    

19. The Legislature has deemed an agency proceeding "substantially justified" if the agency "had a reasonable basis law and in fact at the time it was initiated." Section 57.111(3)(e), Florida Statutes. The test is one of reasonableness of the agency's action in a particular case, and the agency is not required to prevail or even to establish that its decision to litigate was based on a substantial probability of prevailing. Ashburn v. United States, 740 F.2d 843 (11th Cir., 1984).

    
    

20. Here, there is no real dispute concerning the issue of whether violations of permit conditions occurred at the project site. The dispute concerns the issue of who is the responsible party for such violations.

    
    

21. The evidence establishes that petitioner prepared the subject permit application and the drawings attached thereto; all correspondence regarding the permit was addressed to the petitioner; petitioner was the project engineer, as well as the resident project representative; petitioner performed daily on site inspection duties during construction; petitioner certified the project complete; and petitioner attended all preliminary meetings involving the permit violations and attempted to justify the use of concrete instead of sand by referring to changed circumstances. Based upon these facts, DER staff believed that Learned Engineering and Development, Inc., as the authorized agent for the

    permittee (the CEPD), was directly involved and in total control of what was and what was not done on the project site, and was therefore the responsible party for permitting, installation and resolving problems. This was not an unreasonable factual assumption.

    
    

22. Citing the law regarding liability as between principals and agents, petitioner asserts that the CEPD, as the permit holder, is liable for any violations of permit conditions and that the DER, knowing that petitioner was acting in the capacity of an agent for the CEPD, was not legally justified in naming petitioner in the Notice of Violation and Orders for Corrective Action. While such a contention may indeed have been a defense to the action brought by DER, it does not establish that DER's enforcement action against the petitioner was not substantially justified. Whether or not petitioner can ultimately be held liable for actions taken by or on behalf of the principal pursuant to the contractual agreement between it and the CEPD is not the issue here. Likewise, whether petitioner was acting within or exceeding the scope of his agency is not the issue. The issues are whether DER had substantial justification to conclude that a violation of either the permit conditions or Chapter 403 had occurred and substantial justification to conclude that petitioner was responsible for such violation. DER is not charged with the responsibility of resolving contract disputes between individuals. Instead, it is charged with the responsibility of protecting the environment and bringing enforcement actions when deemed necessary. Written notices of violation are to be served upon "the alleged violator," Section 403.121(2)(c), Florida Statutes. The issuance of a permit does not relieve any person from complying with Chapter 403 or the Department's rules. Rule 17-4.070(7), Florida Administrative Code.

    
    

23. As noted above, DER's decision to seek enforcement action against the petitioner was premised upon DER's interactions with petitioner during the permitting process, on site inspections and meetings conducted for the purpose of resolving the problems regarding the use of cement in the stabilizes. It cannot be concluded that DER's decision to name petitioner as a party, with recognition in the charging document that petitioner was the agent for the CEPD, had no reasonable basis in law or fact. Accordingly, the Notice of Violation against petitioner was substantially justified, and petitioner is not entitled to attorney's fees and costs pursuant to the Florida Equal Access to Justice Act.

FINAL ORDER

Based upon the findings of fact and conclusions of law recited herein, it is ORDERED that the Petition for Recovery of Attorney's Fees and Costs filed by Learned Engineering and Development, Inc. is DENIED.

ORDERED and ENTERED this 2nd day of March, 1989, in Tallahassee, Florida.

DIANE D. TREMOR

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 455-9675

Division of Administrative Hearings this 2nd day of March, 1989.

COPIES FURNISHED:

Martha J. Edenfield, Esquire Oertel, Hoffman, Fernandez

& Cole, P.A.

2700 Blair Stone Road Tallahassee, Florida 32314-6507

Agusta P. Posner, Esquire Assistant General Counsel Department of Environmental

Regulation

3600 Blairstone Road

Tallahassee, Florida 32399-2400

Dale Twatchmann, Secretary Department of Environmental

Regulation

2600 Blair Stone Road Tallahassee, Florida 32399-2400

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAY OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 86-003950F

Orders for Case No: 86-003950F