STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHRYSLER CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 94-3869

) PLAZA DODGE, INC., and MICHAEL )

L. PAPPAS. JR., )

)

Respondents. )

)

RECOMMENDED ORDER

A hearing was held in this case in Clearwater, Florida on February 6, 1996, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Dean Bunch, Esquire

Cabaniss, Burke & Wagner, P.A. 909 East Park Avenue Tallahassee, Florida 32301

Edward H. Weeby, Esquire Chrysler Corporation 12000 Chrysler Drive

Highland Park, Michigan 48288-0001

For Respondents: Daniel E. Myers, Esquire

Walter E. Forehand, Esquire Myers & Forehand

402-B North Office Plaza Drive Tallahassee, Florida 32301

Marie L. De Marco, Esquire

D. Scott Douglas, Esquire MacFarlane, Ausley, Ferguson

and McMullen

Post Office Box 1669 Clearwater, Florida 34617

STATEMENT OF THE ISSUE

The issue for consideration in this matter is whether Respondent, Michael

L. Pappas, Jr., should be granted permission to purchase 20 percent of the stock in Plaza Dodge, Inc., and be recognized as executive management thereof, or whether the purchase should be rejected because of Mr. Pappas's prior conviction of a felony and alleged bad character.

PRELIMINARY STATEMENT

By Verified Complaint received in the offices of the Department of Motor Vehicles on July 5, 1994, Chrylser Corporation, (Chrysler), sought to reject the application of Respondent, Michael L. Pappas, Jr., for approval to purchase 20 percent of the stock in Plaza Dodge, Inc., (Plaza), and for approval to be recognized as the executive management of the dealership. Thereafter, Respondents requested formal hearing on the denial and this hearing followed.

At the hearing, Chrysler presented the testimony of William S. Hurst, head of Chrysler's Dealer Agreements Department; and that of Michael L. Pappas, Jr., Respondent. Chrysler also introduced Petitioner's Exhibits 1 through 5. Mr.

Pappas also testified in his own behalf and presented the testimony of Paula F. Pappas, his wife; Blaine P. Licouris, longtime family friend and former Chief of Police and City Manager of Tarpon Springs, Florida; Brad W. Kenyon, President of Kenyon Dodge; and Edward A. Mariani, longtime friend and business associate of the Respondent. Respondent introduced no Exhibits.

A transcript of the proceedings was furnished and following receipt thereof, both parties, pursuant to Respondent's request for extension of time agreed to by Petitioner, submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent to the issues herein, Chrysler was a motor vehicle manufacturer licensed to do business in Florida; Plaza was a motor vehicle dealer licensed by the state; and Michael L. Pappas, Jr. was an individual seeking to purchase an ownership share in Plaza Dodge. He has been general manager of Plaza Dodge since January, 1993.

   
   

2. On May 9, 1994, Plaza notified Chrysler that Mr. Pappas intended to purchase a 20 percent ownership interest in its shares and become executive manager of the dealership. The existing dealership agreement between Chrysler and Plaza reflects Mr. Pappas' father, Michael L. Pappas, is the sole owner and manager of the dealership. This agreement is not assignable without the consent of Chrysler Corporation.

   
   

3. In his application submitted to Chrysler, Mr. Pappas indicated he had been convicted in 1987 of several felony counts dealing with his sale and possession of cocaine in 1985. As a result of that conviction, Mr. Pappas was sentenced to four years in prison, fined $50,000, and placed on five years probation. After he had been incarcerated for approximately six months, Mr. Pappas was placed in to a work release program for five months and then released to serve his five years probation. There is some indication this early release was effected because of prison crowding. The probation was terminated in July, 1991, earlier than scheduled. There is no evidence he has been pardoned.

   
   

4. Mr. Pappas' civil rights were restored in August, 1992, through the simple process of applying for it. As was previously stated, he has been serving as general manager of Plaza since January, 1993. Since he has been serving in that capacity, Chrysler has been aware of his position and has not complained. In fact, he has, without objection, attended official functions put on by Chrysler in his capacity as the representative of Plaza Dodge. He was identified as an officer of the dealership when it applied to the state for licensure, and revealed his conviction on the licensure application. The application was approved by the Department of Highway Safety and Motor Vehicles

5. Chrysler has rejected Mr. Pappas' application to purchase an ownership share in the dealership and his proposed executive management thereof citing as grounds for its rejection his prior felony convictions as evidence of his bad character. Chrysler contends that Mr. Pappas' conviction would adversely impact on the public confidence in the dealership and would have an adverse effect on sales. It sells and services vehicles only though its dealers and relies upon its dealerships to project its corporate image. Chrysler is also concerned that, since it accepts warranty claims at face value from its dealers, it must be able to rely on the character and integrity of those dealers to insure the warranty service was performed and the vehicles sold as claimed. No evidence exists to indicate this would not be the case here. The only evidence of the potential for problem came in the testimony of Chrysler's own official in explanation of its policy regarding dealership owners was presented and no indication of any dealership misconduct by Plaza under Mr. Pappas' stewardship was shown.

   
   

6. Chrysler has adopted a policy prohibiting approval of anyone for ownership of a dealership who has "a prior felony conviction or other derogatory personal or character reputation or background which could be detrimental to or otherwise harm the image of Chrysler, the dealership, other Chrysler dealers of Chrysler products." Chrysler has attempted to enforce that policy uniformly and has taken the position that the conviction of a felony, by itself, will have a detrimental impact on the image of Chrysler Corporation. The evidence of record in this case does not seem to support that position, however.

   
   

7. All during the time of his incumbency as Plaza's general manager the dealership's customer relations, as reflected by sales and service performance, has been rated as good, and those ratings have reflected an improvement over previous years. At no time has Chrysler objected to Mr. Pappas' presence at the dealership until now, and Chrysler presented no evidence of a lack of customer satisfaction with dealership performance or of its dissatisfaction with Plaza's share of the market. By the same token, the financial stability of Mr. Pappas or the dealership was not brought into issue.

   
   

8. The evidence of record, through the testimony of others including an area Chrysler dealer, indicates that Mr. Pappas is well versed in the intricacies of operating an automobile dealership and has a good reputation for ability as well as character and integrity in the auto sales and service community. In addition to his employment in the management of a popular family restaurant Mr. Pappas has been involved in several other business partnerships and his partners speak well of his character and his business acumen.

   
   

9. Mr. Pappas also appears to have earned the confidence of the community at large. Former law enforcement officials who were in office at the time of his arrest indicated there was no evidence of any serious misconduct on his part aside from that for which he was convicted. In the opinion of the former Tarpon Springs Police Chief, he appears to have been rehabilitated. In addition, Mr. Pappas appears to be a concerned parent and is active in community affairs. He shows remorse for his former misconduct and desires to have another opportunity to prove himself.

   
   

10. At the time of his arrest, and during the period prior thereto, when he had been heavily into the use of cocaine, Mr. Pappas, along with his two cousins, was employed in the family restaurant in Tarpon Springs and had advanced to a position of responsibility. The three cousins were soon to assume some ownership interest in the establishment, but because of his conviction, Mr.

    Pappas was determined to be ineligible to be an officer in a corporation which held a liquor license.

    
    

11. While using cocaine, Mr. Pappas periodically had it in his possession at work in the restaurant and was using it at least six days a week. He was involved at the time with a woman, Ms. Gleason, a drug and alcohol addict, to whom he supplied cocaine more than half of the times they were together. He sold cocaine to both Ms. Gleason and to others in order to support his own habit. Many of his sales were of large amounts bringing him several thousands of dollars at a time. Even after he was married in 1983, he continued to use cocaine even though he told his wife he had stopped. There is no evidence of his use or possession of cocaine any time after his release from prison, however.

CONCLUSIONS OF LAW

12 The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.

1. Section 320.643(2), Florida Statutes, dealing with the sale of stock in a motor vehicle dealership, prohibits Chrysler from prohibiting in any fashion the sale or transfer of an interest in a licensed dealership unless it proves that:

   
   

   such [transfer] is to a person who is not, or whose controlling management is not, of good moral character.

   
   

2. By the same token, Section 320.644, Florida Statutes, prevents Chrysler from prohibiting or preventing a dealer from changing its executive management:

   
   

   unless the proposed change of executive management control of the motor vehicle dealer is to a person or persons not of good

   moral character or who do not meet the written, reasonable, and uniformly applied standards

   of the licensee [Chrysler] relating to the business experience of executive management required by the licensee of its motor vehicle dealers.

   
   

3. Under these criteria, Chrysler can deny Mr. Pappas permission to purchase an ownership interest in the dealership if it can show he is not of good moral character or if he does not satisfy the manufacturer's "written, reasonable, and uniformly applied standards ...relating to the business experience of executive management required by [Chrysler] of its motor vehicle dealers."

   
   

4. In the instant case, Chrysler has not raised any objection to Mr. Pappas based on an alleged lack of appropriate business experience. It's entire objection is based on his arrest and conviction for the possession and sale of cocaine, activity which took place in excess of ten years prior to the application. Chrysler relys on its policy that prevents convicted felons from becoming or remaining owners of dealerships of Chrysler products, citing as

   support therefor Section 320.27(9)(s), Florida Statutes, dealing with the denial, suspension or revocation of a dealer license, which states:

   
   

   When a motor vehicle dealer is convicted of a crime which results in his being prohibited from continuing in that capacity, the dealer may not continue in any capacity within the

   industry. The offender shall have no financial interest, management, sales, or other role in the operation of a dealership. Further, he may not derive income from the dealership beyond reasonable compensation for his ownership interest in the business.

   
   

5. Clearly, Chrysler is stretching in its attempt to apply that provision here. Mr. Pappas was not affiliated with the motor vehicle industry in any way at the time he was involved in the offenses for which he was tried and convicted. Absent a showing of some continuing direct disqualification, it is difficult to conclude his mere conviction of a felony, by itself, prohibits his "continuing" in the industry.

   
   

6. More pertinent is the issue of whether Mr. Pappas's involvement with and conviction for possession and sale of cocaine, more than ten years ago, constitutes a present lack of good moral character so as to fall within the parameters of Section 320.644(1).

   
   

7. Clearly the unauthorized possession, use, and sale of cocaine is an indication of a character defect. It may even be said that one who is currently possessing, using or selling cocaine without lawful authority is demonstrating a lack of good moral character. However, once such an individual has paid his debt to society and undergone the punishments imposed by law for his misconduct; has benefited from society's rehabilitative efforts; and thereafter, for an extended period, demonstrated his rehabilitation and comported himself in a manner consistent with indicia of good character and good citizenship, is his prior involvement, so long ago and absent any indication of further misconduct, continuing evidence of poor moral character. Surely not.

   
   

8. The courts have held, and rightly so, that a manufacturer has the right to maintain the integrity of its trade name in the marketplace. It is recognized that a disreputable franchisee can quickly destroy such a valuable commodity. Therefore, the ultimate question is whether Chrysler can rely on Mr. Pappas' lack of criminal involvement in the time since his arrest and conviction, or whether the taint of the original commission of the offense carries forward through time to offset the apparent rehabilitation. It is pertinent to note, in that regard, that Mr. Pappas has served as general manager of the dealership for quite some time with Chrylser's knowledge and apparent concurrence. At no time during that period, has there been any indication that the integrity of Chrysler's trade name in any way has been diminished. In fact, the dealership has, it would appear, performed well in both sales and customer satisfaction under Mr. Pappas' stewardship. Therefore, and in the utter absence of any evidence of impropriety by Mr. Pappas during his period of association with the dealership, Chrysler's fears would seem to be without reasonable foundation in this case.

   RECOMMENDATION

   Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department enter a final order finding that Michael L.

   Pappas, Jr. is shown to be of good moral character and is qualified to be an equity owner and executive manager of Plaza Dodge, Inc.

   
   

   DONE and ENTERED this 16th day of April, 1996, in Tallahassee, Florida.

   
   

   
   

   ARNOLD H. POLLOCK, 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 16th day of April, 1996.

   
   

   APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-3869

   
   

   To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact:

   
   

   Petitioner's Proposed Findings of Fact.

   
   

   1. - 9. Accepted and, as appropriate, incorporated in this Recommended Order.

10. - 15. Accepted.

16. - 21. Accepted and incorporated herein.

22. - 26. Accepted and incorporated herein.

27. & 28. Accepted and incorporated herein.

1. - 37. Accepted.

   38. Accepted and incorporated herein.

   
   

   Respondent's Proposed Findings of Fact.

   
   

   Respondent has listed two paragraphs 5 in his Recommended Order.

   Therefore, all reference to Proposed Findings of Fact numbered 6 and after related to the paragraph numbered one less in the proposal.

   
   

   1. - 4. Accepted and incorporated herein.

5. & 6. Accepted and incorporated herein.

7. - 11. Accepted and incorporated herein.

1. - 17. Accepted and incorporated herein.

   1. Accepted.

   2. Accepted.

COPIES FURNISHED:

Dean Bunch, Esquire Cabaniss & Burke, P.A. 909 East Park Avenue

Tallahassee, Florida 32301

Edward Weeby, Esquire Senior Staff Counsel Chrysler Corporation 12000 Chrysler Drive

Highland Park, Michigan 48288-0001

Daniel E. Myers, Esquire Walter E. Forehand, Esquire Myers & Forehand

402-B North Office Plaza Drive Tallahassee, Florida 32301

Marie L. Demarco, Esquire

D. Scott Douglas, Esquire MacFarlane, Ausley, Ferguson

and McMullen

400 Cleveland Street Clearwater, Florida 34615

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to the Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the agency that will issue the Final Order in this case concerning their rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 94-003869

Orders for Case No: 94-003869