STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DANIEL BRUCE CAUGHEY, )

)

Petitioner, )

)

vs. ) CASE NO. 90-4473F

) DEPARTMENT OF INSURANCE, )

)

Respondent. )

)

FINAL ORDER

This matter was scheduled for final hearing in Tallahassee, Florida, before Robert T. Benton, II, Hearing Officer of the Division of Administrative Hearings, on November 13, 1990, but the hearing was cancelled when the parties agreed to proceed on stipulated facts. The parties filed proposed orders on December 12 and 13, 1990.

APPEARANCES

For Petitioner: Bruce A. McDonald, Esquire

700 South Palafox Street, Suite 3C Pensacola, Florida 32501

For Respondent: James A. Bossart, Esquire

412 Larson Building

Tallahassee, Florida 32399-0300 STATEMENT OF THE ISSUE

Whether respondent should be required to pay costs and fees petitioner incurred in defending against the administrative complaint eventuating in Department of Insurance v. Daniel Bruce Caughey, No. 89-2651 (DOAH; April 2, 1990).

PRELIMINARY STATEMENT

After a final order was entered on June 8, 1990 in Case No. 89-L-245RVE, the number respondent assigned to Department of Insurance v. Daniel Bruce Caughey, No. 89-2651 (DOAH; April 2, 1990), the respondent in that proceeding initiated the present proceedings, in accordance with Section 57.111, Florida Statutes (1989) and Rule 221-6.035, Florida Administrative Code. The parties' stipulation is the basis for the following.

FINDINGS OF FACT

1. On September 8, 1987, the Department of Insurance received a letter dated September 1, 1987, from Joseph F. Kinman, Jr., which stated:

   
   

   Another insurance agent (Daniel Bruce Caughey) from Pensacola, Florida and his incorporated agency (Caughey Insurance Agency, Inc.) are refusing to forward premium payments on to Jordan Roberts & Company, Inc. despite a final judgment for such amounts here in Hillsborough County Circuit Court.

   Enclosed is a copy of the Final Judgment entered August 13, 1987, as well as a copy of the Complaint. We represent Jordan Roberts & Company, as well as Poe & Associates, Inc. here in Tampa, Florida. In approximately August of 1982, Daniel Bruce Caughey and Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts & Company, Inc. wherein Mr. Caughey and the Agency were to collect premiums on behalf of Jordan Roberts & Company, Inc. and in turn, Mr. Caughey and the Agency were to receive commissions. Mr. Caughey signed an Individual Guarantee Agreement on October 21, 1983, guaranteeing that Brokerage Agreement with Caughey Insurance Agency, Inc.

   Mr. Caughey and the Agency failed to forward the insurance premiums collected on behalf of Jordan Roberts & Company, Inc. despite repeated demands and inquiries. Finally, a lawsuit was filed against Mr. Caughey and the Agency in the Circuit Court of the Thirteenth Judicial Circuit of the State of Florida, in and for Hillsborough County in December of 1986. Final judgment for Jordan Roberts & Company, Inc. against Mr. Caughey and the Agency was entered on August 13, 1987, for an amount of $6,595.94.

   Mr. Caughey and his Agency have unlawfully withheld monies belonging to an insurer, Jordan Roberts & Company, Inc. and, accordingly, appear to be in violation of Florida Statutes 626 et seq. Jordan Roberts & Company, Inc. has a judgment for unpaid insurance premiums against Mr. Caughey and the Agency, however, Mr. Caughey and the Agency refuse or fail to pay over to Jordan Roberts & Company, Inc. premium funds rightfully belonging to Jordan Roberts & Company, Inc.

   Accordingly, we would respectfully request that your office conduct an investigation of Mr. Caughey and the Caughey Insurance Agency, Inc.

   Enclosed with this letter were copies of the complaint and final judgment in the circuit court case, Case No. 86-21454. As found in the main administrative case, Case No. 89-2651:

   
   

   1. In Count 1, JORO's complaint [in Case No. 86-21454] alleges the existence of a brokerage agreement between JORO and Caughey Insurance Agency, Inc., entered into "[o]n or about April 27, 1982"; execution and delivery of respondent's guarantee "[o]n or about October 21, 1983"; and the agency's indebtedness "for premiums on policies underwritten by [JORO] for the sum of

      $20,975.36." Petitioner's Exhibit No. 3.

   2. In Count II, the complaint also alleges execution and delivery of a promissory note "[o]n or about October 21, 1983," without, however, explicitly indicating its relationship (if any) with the guarantee executed the same date. Petitioner's Exhibit No. 3. The final judgment does not specify which count(s) JORO recovered on. Petitioner's Exhibit No. 4.

   3. Attached to the complaint are copies of the promissory note, executed by "CAUGHEY INSURANCE AGENCY, INC., By: D B Caughey Vice President"; the guarantee, executed in the same way; and the brokerage agreement, executed on behalf of Caughey Insurance Agency by "William C. Caughey, President." Although the Individual Guarantee Agreement names respondent as guarantor in the opening paragraph, the corporation is shown as guarantor on the signature line.

      
      

      The complaint does not allege and the judgment does not recite that respondent personally failed to remit premiums but says he is responsible as an officer of the agency.

      
      

2. Without any further investigation, as far as the record shows, the Department of Insurance filed a complaint amended on April 24, 1989, to allege, inter alia, that "[o]n or about August 19, 1982 Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts and Company, Inc. . . .

   requir[ing] Caughey Insurance Agency, Inc. to remit premiums, unearned commissions and additional premiums to Jordan Roberts and Company, Inc."; and that respondent "personally guaranteed the [agency's] obligation under

   this agreement in" writing, but "failed to remit five thousand five dollars and forty-four cents due under th[e] agreement" for which sum Jordan Roberts and Company, Inc. obtained judgment.

   
   

3. After a formal administrative hearing, a recommended order was entered on April 2, 1990, recommending dismissal of the administrative complaint, because "ambiguities in the court papers do not clearly and convincingly rule out the possibility that the court's judgment rests on the dishonored promissory note . . . [rather than] a breach of respondent's [here petitioner's] fiduciary

   responsibilities." In its final order, the Department dismissed the administrative complaint; Daniel Bruce Caughey was the prevailing party in that case.

   
   

4. The parties have stipulated that "Daniel B. Caughey qualifies as a small business party as defined in Section 57.111(3)(d), Florida Statutes." The parties also stipulated that the "total value of the reasonable attorney's fees and costs at issue is $2,830."

   
   

   CONCLUSIONS OF LAW

   
   

5. In accordance with Section 57.111 and 120.57(2), Florida Statutes (1989) and Rule 221-6.035, Florida Administrative Code, the Division of Administrative Hearings has jurisdiction of proceedings like these initiated pursuant to the Florida Equal Access to Justice Act. Section 57.111(4)(b)1., Florida Statutes (1989).

   
   

6. Because respondent here initiated the main proceeding and because petitioner here prevailed in the main administrative proceeding, the agency must reimburse petitioner his fees and costs, unless it was "substantially justified" in filing the administrative complaint. Section 57.111(4)(a), Florida Statutes, provides:

   
   

   an award of attorney's fees and costs shall be made to a prevailing party in any adjudicatory proceeding or administrative proceeding pursuant to Chapter 120 initiated by a state agency, unless the actions of the state agency were substantially justified or special circumstances exist which would make the award unjust.

   
   

   Section 57.111(3)(e), Florida Statutes, provides:

   
   

   A proceeding is substantially justified if it had a reasonable basis in law and fact at the time it was initiated by the state agency.

   
   

   "[T]he burden was on the agency to prove -- once the licensee presented evidence showing that it was a prevailing small business party -- that its action in prosecuting the administrative complaint was substantially justified." Department of Professional Regulation, Division of Real Estate v. Toledo Realty, Inc., 549 So.2d 715, 718 (Fla. 1st DCA 1989); Gentele v. Department of Professional Regulation, Board of Optometry, 513 So.2d 672 (Fla. 1st DCA 1987).

   
   

7. The question for decision is whether probable cause to file the administrative complaint existed at the time the filing occurred, not whether the case might have been better handled at some later stage of the proceeding. See Larry Wayne Lindsey v. Department of Insurance and Treasurer, No. 88-3905F (DOAH; December 12, 1988). "If a proceeding `had a reasonable basis in law and fact at the time it was initiated, Section 57.111(3)(e), Florida Statutes (1989), the Florida Equal Access to Justice Act does not relieve even prevailing small business parties of paying their own attorney's fees and costs. The Act is designed to discourage unreasonable governmental action, not to paralyze agencies doing the necessary and beneficial work of government." Jack J. Rudloe and Gulf Specimen Co., Inc. v. Department of Environmental Regulation, No. 88- 3421F (DOAH; Nov. 8, 1988) at p. 13.

8. Whether, as petitioner contends, the complaint to the Department of Insurance was an effort to collect a debt is immaterial to the question whether the Department was substantially justified in filing the administrative complaint against petitioner. Although the letter from petitioner's creditor's lawyer was hearsay, it does contain allegations which, if believed, would demonstrate statutory violations. In deciding that the entire investigative file is relevant to the question whether a prosecuting agency had probable cause to go forward with an administrative prosecution, the court in Department of Professional Regulation, Division of Real Estate v. Toledo Realty, Inc., 549 So.2d 715 (Fla. 1st DCA 1989) necessarily assumed that hearsay can be relevant on such questions. Here, allegations reaching the Department gave it substantial justification to proceed against petitioner, even though it failed to prove its case at hearing.

It is, accordingly, ORDERED:

The petition for award of attorney's fees and costs is denied.

DONE and ENTERED this 27th day of December, 1990, in Tallahassee, Florida.

ROBERT T. BENTON II

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 27th day of December, 1990.

COPIES FURNISHED:

Bruce A. McDonald, Esquire 700 S. Palafox Avenue Suite 3-C

Pensacola, FL 32501

James A. Bossart, Esquire Division of Legal Services

412 Larson Building Tallahassee, FL 32399-0300

Tom Gallagher,

State Treasurer and Insurance Commissioner

Department of Insurance and Treasurer

The Capitol, Plaza Leval Tallahassee, FL 32399-0300

Don Dowdell, General Counsel Department of Insurance and Treasurer

The Capitol, Plaza Level Tallahassee, FL 32399-0300

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 RULE 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 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 90-004473F

Orders for Case No: 90-004473F