STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WALTER D. SHEALY, III, )

)

Petitioner, )

)

vs. ) CASE NO. 92-3223F

) FLORIDA REAL ESTATE COMMISSION, )

)

Respondent. )

)

FINAL ORDER

Pursuant to written notice, a formal hearing was conducted in this proceeding before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on March 1, 1993, by telephone.

APPEARANCES

For Petitioner: Joel Hirschhorn, Esquire

Joel Hirschhorn, P.A.

2600 Douglas Road, Penthouse One Coral Gables, Florida 33134

For Respondent: Manuel E. Oliver, Esquire

Assistant Attorney General Department of Legal Affairs Suite 107 South Tower

400 West Robinson Street Orlando, Florida 33040

STATEMENT OF THE ISSUE

The issue for determination in this proceeding is whether Petitioner is entitled to reasonable attorney fees and costs in accordance with Section 57.111, Florida Statutes.

PRELIMINARY STATEMENT

Petitioner claims he is entitled to attorney fees and costs in the respective amounts of $7,465.00 and $585.30 as the prevailing small business party under Section 57.111, Florida Statutes. Respondent asserts four grounds in opposition to Petitioner's claim. First, Respondent alleges that the Petition for Attorney Fees and Costs is deficient under Section 57.111, Florida Statutes, and Florida Administrative Code Rule 22I-6.035 (sic). Second, Respondent contends that Petitioner is not a small business party within the meaning of Section 57.111(3)(d). Third, Respondent maintains that its denial of Petitioner's application for a real estate sales license was substantially justified. Finally, Respondent denies that the amount of fees and costs claimed by Petitioner is reasonable and necessary.

A formal hearing was conducted by telephone to receive evidence on the small business party issue. Expert opinion regarding attorney fees and costs was submitted by affidavit pursuant to stipulation by the parties. The parties stipulated to the remaining facts.

At the formal hearing, Petitioner testified in his own behalf and submitted two exhibits. The exhibits consisted of Petitioner's real estate sales license and a letter corroborating Petitioner's employment from September, 1989, through December, 1990. Petitioner's Exhibits 1 and 2 were admitted in evidence without objection. Respondent cross examined Petitioner but submitted no other evidence.

A transcript of the formal hearing was filed with the undersigned on April 5, 1993. Petitioner and Respondent timely filed proposed findings of fact and conclusions of law on April 12 and 15, 1993, respectively. The parties' proposed findings of fact are addressed in the Appendix to this Final Order.

FINDINGS OF FACT

1. Petitioner filed an application for a real estate sales license on January 22, 1991. Respondent denied Petitioner's application on April 25, 1991, thereby initiating agency action.

   
   

2. The sole basis for the denial of Petitioner's application was the fact that Petitioner was named as a defendant in multiple civil lawsuits filed in United States

   District Court. The law suits arose from the failure of Centrust Savings Bank ("Centrust"). Petitioner was President of Centrust from February, 1988, to sometime in July, 1989. He served on the Board of Directors of Centrust from August, 1987, until sometime in July, 1989.

   
   

   Prevailing Party

   
   

3. Petitioner was the prevailing party in the underlying proceeding. A Recommended Order was entered on January 23, 1992, recommending that Respondent grant Petitioner's application. Shealy v. Florida Real Estate Commission, DOAH Case No. 91-3147. Respondent entered a Final Order on February 21, 1992, adopting ". . . all Findings of Fact, Conclusions of Law and Recommendation . .

   ." Respondent granted Petitioner's application for license upon successful completion of the written examination.

   
   

4. Petitioner successfully completed the written examination and was licensed as a real estate sales agent on March 27, 1992. Since October 7, 1992, Petitioner has been employed as an independent real estate agent with the firm of Real Estate Transactions, Inc., in Miami, Florida ("RET").

   
   

   Small Business Party

   
   

5. Petitioner became self-employed as a financial consultant in January, 1991. From January 17, 1991, through October 6, 1992, Petitioner conducted his financial consulting business in corporate form through WDS Investment, Inc. ("WDS"). WDS was a small business corporation wholly owned by Petitioner and his wife. 1/

   
   

6. Petitioner intended to utilize his real estate license, and a mortgage broker's license he obtained in the Summer of 1991, as an integral part of the financial consulting business he conducted through WDS. In response to a question asking Petitioner to explain his use of the term "self employed," Petitioner stated:

   
   

   I had started WDS Investments. . . . I was unemployed in the tradition[al] sense having been employed for years more as a professional in the financial services field In

   essence, I was going to try to build a consulting practice. I wanted to get my real

   estate license and my mortgage brokers license.

   
   

   Transcript at 20.

   
   

7. Petitioner and WDS were one and the same entity. Petitioner was the sole managing shareholder and officer in WDS. Petitioner was the only person active in WDS and had exclusive management control of the corporation.

   Petitioner regarded WDS as his corporation, regarded himself as self employed, and operated WDS as his corporation. Petitioner is the party claiming fees and costs and the prevailing party in the underlying proceeding.

   
   

8. After Respondent initiated agency action on April 25, 1991, Petitioner had other business activities in addition to his financial consulting business. Petitioner obtained his mortgage broker license in the Summer of 1991. From that time through October 6, 1992, Petitioner worked as an independent mortgage broker and loan consultant with Financial Monitors, Inc. ("Monitors"). Petitioner was an independent contractor and not an employee of Monitors. Petitioner had no ownership interest in Monitors.

   
   

9. Petitioner was employed by Securnet Financial Corporation ("Securnet") from August 1, 1991, to the end of 1991. Petitioner was employed as a manager and had no ownership interest in Securnet. Petitioner's employment with Securnet did not begin until after Respondent initiated agency action on April 25, 1991. His employment with Securnet terminated prior to the commencement of this proceeding on May 26, 1992.

   
   

10. Petitioner became employed as an independent sales agent with RET on October 7, 1992. Petitioner's status as an employee with RET began after agency action was initiated on April 25, 1991, and after this proceeding was initiated on May 26, 1992.

    
    

11. Petitioner is a small business party within the meaning of Section 57.111(3)(d)1., Florida Statutes. Petitioner is domiciled in Florida and has been so domiciled since before this proceeding began on May 26, 1992. The principal office of WDS has been located in the state since January 17, 1991. Petitioner conducted his financial consulting business in corporate form on April

    25, 1991. Since January, 1991, Petitioner has had no more than 25 employees and a net worth of no more than $2 million, including both personal and business investments, either directly or by attribution from his wife, WDS, and his other business activities.

    
    

    Not Substantially Justified

    
    

12. Respondent was not substantially justified in denying Petitioner's license application. Respondent had no reasonable basis in law or fact to deny Petitioner's application. Respondent cited no legal authority to support its denial of Petitioner's application solely on the basis of Petitioner's status as a defendant in civil litigation. Respondent presented no evidence that it undertook an independent determination of the truthfulness or credibility of the allegations in the litigation, no independent evidence to support such allegations, and no evidence to support any other factual basis for Respondent's denial of Petitioner's application.

    
    

13. Respondent presented no evidence of Petitioner's lack of qualification to be licensed as a real estate sales agent. Petitioner made a full and timely disclosure on his application that he was a defendant in civil litigation. Respondent presented no evidence that the allegations in the civil lawsuits were anything other than allegations against numerous officers and directors of Centrust. Respondent presented no evidence of an adjudication of Petitioner's guilt. Respondent presented no evidence to rebut or refute Petitioner's showing that Petitioner is honest, truthful, trustworthy, of good moral character, and has an impeccable reputation for honesty and fair dealing in the business community.

    
    

    Fees And Costs

    
    

14. The attorney fees and costs claimed by Petitioner are reasonable and necessary. Petitioner presented credible and persuasive expert evidence that the attorney fees and costs are reasonable and necessary.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of

    this proceeding. Section 120.57(1), Florida Statutes. The parties were duly noticed for the formal hearing.

    
    

16. Respondent's request for dismissal of Petitioner's claim, due to alleged procedural deficiencies in the Petition for Attorney Fees and Costs, is denied. Petitioner substantially complied with applicable procedural requirements. Ann & Jan Retirement Villa, Inc.

    v. Department of Health and Rehabilitative Services, 580 So.2d 278, 279 (Fla. 4th DCA 1991). Respondent had sufficient and adequate notice of the nature and scope of the claim against it. Uncertainty caused by the alleged deficiencies, if any, could have been resolved through discovery. See, e.g., Hickey v. Wells, 91 So.2d 206, 209 (Fla. 1957) (holding that due process requires a procedure for disclosure or a specific accusation, but not both.)

    
    

17. Petitioner has the burden of proof in this proceeding. The burden of proof in an administrative proceeding is on the party asserting the affirmative of the issue unless the burden is otherwise specifically established by statute. Young v. State, Department of Community Affairs, 567 So.2d 2 (Fla. 3d DCA 1990); Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977).

    
    

18. The initial burden is on Petitioner to show by a preponderance of the evidence that he is a prevailing small business party. Department of Professional Regulation, Division Of Real Estate, v. Toledo Realty, Inc., 549 So.2d 715, 716 (Fla. 1st DCA 1989). The burden then shifts to Respondent to establish that its agency action was substantially justified. Id. If Petitioner satisfies the test for "a prevailing small business party" in Section 57.111(3)(c), Florida Statutes, and the test for a "small business party" in Section 57.111(3)(d), he is entitled to reasonable fees and costs under Section 57.111(4)(a) unless Respondent shows that its action was substantially justified.

    
    

    Prevailing Small Business Party

    
    

19. Section 57.111(3)(c)1., Florida Statutes, provides that a person is the prevailing small business party when:

    
    

    A final judgment or order has been entered in favor of the small business party and such judgment or order has not been reversed on appeal or the time for seeking judicial review of the judgment or order has expired. (emphasis supplied)

    
    

    The test for a "small business party" is prescribed entirely in Section 57.111(3)(d). The word "party" in the term "prevailing small business party" merely requires a party claiming fees and costs to prevail in the underlying proceeding and to qualify as a small business party in the proceeding for fees and costs.

    
    

20. Petitioner is the party claiming fees and costs, and he prevailed in the underlying proceeding. If Petitioner satisfies the legislatively prescribed test for a small business party in Section 57.111(3)(d), Florida Statutes, Petitioner is the prevailing small business party for purposes of Sections 57.111(3)(c)1. and (4)(a).

    
    

    Small Business Party

    
    

21. A small business party is defined in Section 57.111(3)(d)1., Florida Statutes, by reference to two points in time. At the time of the proceeding under Section 57.111, a party claiming fees and costs must be domiciled in Florida, and the principal office of the business of that party must be located in the state. See Jory v. Department of Professional Regulation, 583 So.2d 1075 (Fla. 1st DCA 1991) (holding that the requirements for domicile and office location are reasonably related to the state's economic interests and that the state's financial resources would otherwise become available to nonresidents who do not aid the state's economy or replenish the state's coffers by paying taxes). At the time agency action is initiated in the underlying proceeding, a party claiming fees and costs must conduct his or her business as: a sole proprietor of an unincorporated business, including a professional practice; a partnership; or a corporation (an "authorized business format"). At the same time, the party claiming fees and costs must have had no more than 25 employees and a net worth of no more than $2 million, including both business and personal assets.

22. At all times material to this proceeding, Petitioner satisfied the requirements for domicile and office location. Petitioner and his wife have been domiciled in Florida since 1987. The principal office of WDS has also been located in the state since January 17, 1991. 2/

    
    

23. Once the requirements for domicile, and office location have been satisfied, the focus of the small business party test shifts to the point in time when agency action was initiated. Agency action was initiated in the underlying proceeding when Respondent was required by law to advise Petitioner of a clear point of entry. Section 57.111(3)(b)3., Florida Statutes; Ann & Jan Retirement Villa, Inc., 580 So.2d at 280. Section 120.60(2) requires Respondent to provide Petitioner with a clear point of entry ". . . [o]n denial of a license application "

    Respondent denied Petitioner's license application, and thereby initiated agency action, on April 25, 1991.

    
    

24. At the time agency action was initiated on April 25, 1991, Petitioner conducted his financial consulting business in an authorized business format. Prior to January 17, 1991, Petitioner was the sole proprietor of an unincorporated financial consulting business. From January 17, 1991, through October 6, 1992, Petitioner conducted his financial consulting business in corporate form through WDS Investments, Inc. ("WDS").

    
    

25. Petitioner's other business activities after agency action was initiated did not invalidate the authorized business format in which Petitioner conducted his financial consulting business on April 25, 1991. From the Summer of 1991 through October 6, 1992, Petitioner conducted his mortgage brokerage business as a sole proprietor of an unincorporated business, including a licensed professional practice. Petitioner's employment by Securnet Financial Corporation from August 1, 1991, to the end of 1991, and by Real Estate Transactions, Inc., ("RET") after October 6, 1992, does not invalidate the authorized business format in which Petitioner conducted his financial consulting business at the time agency action was initiated.

    
    

26. At the time agency action was initiated in the underlying proceeding, a party seeking to qualify as a

    small business party in the proceeding for fees and costs must have:

    
    

    . . . not more than 25 full-time employees or a net worth of not more than $2 million, including both personal and business investments . . . .

    Section 57.111(3)(d)1., Florida Statutes.

    
    

    On April 25, 1991, Petitioner had no more than 25 employees and a net worth of no more than $2 million, including both personal and business investments, either directly or by attribution from his wife and WDS. 3/

    
    

27. The legal distinction between an individual and his or her business is disregarded, for purposes of the small party test, when the business and the individual are one and the same entity. Ann & Jan Retirement Villa, Inc.,

    580 So.2d at 280; Anthony Gentele, O.D., v. Department Of Professional Regulation, Board Of Optometry, 9 FALR 310,

    323 (DOAH Case No. 85-3857F, Final Order entered on June 20, 1986), affirmed on other grounds, Gentele v. Department Of Professional Regulation, Board Of Optometry, 513 So.2d 672 (Fla. 1st DCA 1987) [hereinafter Gentele, 9 FALR at

    or 513 So.2d at .] The individuals in Gentele and Ann & Jan Retirement Villa, Inc. owned all of the stock of their respective corporations. In each case, the individual and business were found to be one and the same entity.

    
    

28. The fact that Petitioner did not own all of the stock of WDS does not prevent the legal distinction between Petitioner and WDS from being disregarded for purposes of the small business party test. Petitioner was the sole managing shareholder and officer in WDS. Petitioner was the only person active in WDS and had exclusive management control of the corporation. Petitioner regarded himself as self employed, regarded WDS as his corporation, and operated WDS as his corporation. Petitioner and WDS were one and the same entity. Petitioner is the party claiming fees and costs in this proceeding, and Petitioner prevailed in the underlying proceeding.

    
    

29. In Gentele, a state agency initiated a two count license revocation proceeding against an optometrist who conducted business through his wholly owned corporation. The agency prevailed on the first count, but the individual licensee prevailed on the second count. Gentele, 9 FALR at 320.

    
    

30. The individual licensee in Gentele claimed fees and costs under Section 57.111, Florida Statutes. He asserted that agency action based on the second count was not substantially justified. The state agency contended

    that the individual licensee did not qualify as a small business party. The agency argued that the license revocation proceeding was initiated against the licensee individually, rather than his corporation, and that the corporation was not a party to the underlying proceeding.

    
    

31. The Hearing Officer in Gentele rejected the legal distinction between the individual licensee and his corporation, in part, because such a distinction would lead to a result not intended by the legislature. Gentele, 9 FALR at 320. However, the Hearing Officer concluded that the state agency was substantially justified in taking action based on the second count and denied the claim for fees and costs. Gentele, 9 FALR at 320.

    
    

32. The individual licensee in Gentele appealed the determination that the agency action was substantially justified. The state agency appealed the determination that the optometrist was a small business party. The court affirmed the determination that the agency action was substantially justified and declined to address the cross appeal by the state agency. Gentele, 513 So.2d at 672 and 673. The court's refusal to address the cross appeal left in tact the conclusion to disregard the legal distinction between the individual licensee and his corporation.

    
    

33. Any doubt left by the unresolved cross appeal in Gentele was clarified in Ann & Jan Retirement Villa, Inc.,

    580 So.2d at 280. In that case, a corporate adult congregate living facility challenged a state agency's refusal to renew a license to operate the facility. The license was held by an individual who owned all of the stock of the corporation. 4/ The agency maintained that a report of medical neglect against the individual had not been timely challenged by the owner and could not be amended or expunged either in the license proceeding or otherwise. The corporation sought review of all grounds for the agency's denial including the report of medical neglect against the individual. Ann & Jan Retirement Villa, Inc., 12 FALR 1541, 1542 (DOAH Case No 89-6186F, Final Order entered on March 20, 1990).

    
    

34. The agency in Ann & Jan Retirement Villa, Inc. ultimately withdrew its objection to the license renewal and voluntarily dismissed the license proceeding. The corporation sought fees and costs for unreasonable agency action taken against the individual licensee.

    
    

35. The Hearing Officer denied the corporation's claim. In concluding that the individual licensee was not a "small business" (sic), the Hearing Officer stated:

    
    

    The case underlying the request for attorney's fees involved two distinct actions. First, the denial of the license renewal and second, the allegations of medical neglect. While the record of the medical neglect was specified as grounds for nonrenewal, it only involved the individual . . ., not the entity . . . .

    (emphasis not supplied) Consequently, any amendment or expungement related to the allegations of medical neglect would have only related to the individual

    . . . .

    * * *

    The Petitioner has failed to prove the individual . . . is a small business (sic)

    . . . . Consequently, (the individual's) success at having a record amended or expunged would not be the basis for recovery of attorney's fees and costs. . . .

    
    

    Ann & Jan Retirement Villa, Inc., 12 FALR at 1544-1545.

    
    

36. The court rejected the conclusion that the corporation was not entitled to fees and costs for allegations related to the individual. Compare Ann & Jan Retirement Villa, Inc., 12 FALR at 1544-1545 with Ann & Jan Retirement Villa, Inc., 580 So.2d at 280. The court found that the individual and her business were one and the same entity and disregarded any legal distinction between the two.

    
    

37. The court emphasized in Ann & Jan Retirement Villa, Inc., that a party who is doing business in any authorized business format at the time of the underlying proceeding may qualify as a small business party in the proceeding for fees and costs. Ann & Jan Retirement Villa, Inc.,, 580 So.2d at 280. Otherwise, a party doing business in the form of a sole proprietorship could recover fees and costs while a person doing business in corporate form would be barred from such a recovery unless the corporation was a party to the underlying proceeding. The only difference in

    the two situations is the form in which each party chooses to conduct his or her business. The legislature did not intend for the recovery of fees and costs to depend upon a party's choice among authorized business formats. Gentele,

    9 FALR at 323.

    
    

38. The decisions in Gentele and Ann & Jan Retirement Villa, Inc. did not expressly address the issue of whether unreasonable agency action initiated against an individual in the underlying proceeding must relate to the business of that individual in order for the individual to qualify as a small business party in the proceeding for fees and costs (a "related business test"). The agency action initiated against the individual doctor in Gentele and the unreasonable agency action initiated against the individual in Ann & Jan Retirement Villa, Inc. clearly related to the businesses of those individuals. Neither business could operate without the license of the individual. For the same reason, agency action initiated against the individual on the basis of the report of medical neglect indirectly related to the business of the individual in Ann & Jan Retirement Villa, Inc..

    
    

39. The agency action initiated in the license revocation proceeding in Gentele and the unreasonable agency action initiated in the license renewal proceeding in Ann & Jan Retirement Villa, Inc., substantially affected the businesses of the individual licensees in each case. Neither business could operate without the license of the individual. Section 120.57(1) applies in all proceedings in which the substantial interests of a party are determined by the agency (the "substantially affected test"). The legislature also placed a substantially affected test in Sections 120.54(4)(a), 120.56(1), 120.575(1).

    
    

40. In this proceeding, unreasonable agency action initiated against Petitioner in the license application proceeding neither substantially affected Petitioner's financial consulting business nor related to that business. While Petitioner originally intended to utilize his real estate license as an integral part of his financial consulting business, Petitioner did not in fact follow through with that business plan. 5/ The relationship, if any, between Respondent's unreasonable agency action and the business of WDS was, at best, indirect and tenuous.

    The issue presented under the facts in this proceeding,

    therefore, is whether unreasonable agency action initiated against an individual in a license application proceeding must substantially affect or relate to the business of that individual in order for the individual to qualify as a small business party in the proceeding for fees and costs. A corollary issue is whether the inidvidual or the individual's business must be subject to the jurisdiction or legal authority of the agency.

    
    

41. Section 57.111, Florida Statutes, is based upon comparable federal law. See, e.g., 5 U.S.C. Section 504 (1980). The Florida law is generally given the same construction in Florida courts as the federal law is given in federal courts; to the extent such construction is harmonious with legislative intent for the Florida law. Department Of Professional Regulation, Division Of Real Estate, v. Toledo Realty, 549 So.2d 715, 717 (Fla. 1st DCA 1989).

    
    

42. A significant difference in the state and federal law is that the federal law excludes license application and renewal proceedings from eligibility for fees and costs. 5 U.S.C. Section 504(b)(1)(C)(i). The legislature declined to place such an exclusion in the Florida law. Section 57.111(4)(a), Florida Statutes, authorizes an award of fees and costs in ". . . any adjudicatory proceeding pursuant to chapter 120 initiated by a state agency." Agency action denying a license application is initiated when the agency is required by law to advise a party of a clear point of entry. Sections 57.111 and 120.60(2). The legislature is assumed to know the meaning of the words it uses and to have expressed its intent by using them as it does in the particular enactment. SRG Corporation v. Department of Revenue, 365 So.2d 687 (Fla. 1978); Thayer v. State, 335 So.2d 815 (Fla. 1976). Thus, the legislature did not intend to exclude license application proceedings from Section 57.111. Home Health Care Of Bay County, Florida, Inc. v. Department Of Health And Rehabilitative Services, 10 FALR 5167 (DOAH Case No. 1353F, Final Order entered on June 29, 1988).

    
    

43. Imposition of a substantially affected test or related business test in license application proceedings would frustrate legislative intent for Section 57.111, Florida Statutes. The legislature declined to exclude license application proceedings from Section 57.111 but required an individual applicant to conduct a business at

    the time agency action is initiated against the individual. 6/ In most license application proceedings, the license is required by the state as a condition precedent to doing business. Unreasonable agency action denying an individual's license application, therefore, would not substantially affect or relate to any business conducted by the individual at the time of the application. Ann Miller

    v. Department Of Health And Rehabilitative Services, 10 FALR 5160, 5161 (DOAH Case No. 87-1605F, Final Order entered on October 8, 1987). Imposition of either test in license application proceedings would effectively exclude individual license applications from eligibility for fees and costs after the legislature declined to place such an exclusion in the Florida law. In other words, a substantially affected test or a related business test in license application proceedings would accomplish indirectly that which the legislature declined to accomplish directly.

    
    

44. The word "party" in the term "small business party" requires an individual party claiming fees and costs to qualify as a small business party in the proceeding for fees and costs. It does not require the business of the individual to qualify as a party in either the underlying proceeding or the proceeding for fees and costs. No express provision in Section 57.111, Florida Statutes, requires a business to satisfy a separate substantially affected test or separate related business test. The legislature declined to place either test in the statutory definition of a small business party. Cf. Sections 120.54(4)(a), 120.56(1), 120.57(1), and 120.575(1), Florida Statutes (each section contains a substantially affected test). The legislature is assumed to know the meaning of the words it uses and to have expressed its intent by using them as it does in the particular enactment. SRG Corporation, 365 So.2d 687, supra; Thayer, 335 So.2d 815, supra. Thus, the legislature did not require the business of an individual who seeks to qualify as a small business party to be substantially affected by unreasonable agency action or to be related to such action.

    
    

45. No express provision in Section 57.111, Florida Statutes, requires an individual who is substantially affected by unreasonable agency action in the underlying proceeding to satisfy a separate substantially affected test in order to qualify as a small business party in his or her claim for fees and costs. If an individual claiming fees and costs is substantially affected by the underlying

    proceeding, he or she is only required to prevail in the underlying proceeding and to qualify as a small business party in the proceeding for fees and costs. An additional requirement that the business of the individaul must be substantially affected by unreasonable agency action or related to such action when the individual and his or her business are one and the same entity would give force and effect to the legal distinction rejected in Ann & Jan Retirement Villa, Inc.

    
    

46. In Ann & Jan Retirement Villa, Inc., the Hearing Officer concluded:

    
    

    . . . .While the record of the medical neglect was specified as grounds for nonrenewal, it only involved the individual . . ., not the entity . . . . (emphasis not supplied) Consequently, any amendment or expungement related to the allegations of medical neglect would have only related to the individual (emphasis supplied)

    * * *

    The Petitioner has failed to prove the individual . . . is a small business (sic)

    . . . . Consequently, (the individual's) success at having a record amended or expunged would not be the basis for recovery of attorney's fees and costs. . . .

    (emphasis supplied)

    
    

    Ann & Jan Retirement Villa, Inc., 12 FALR at 1544-1545.

    
    

47. The court rejected the conclusion that the business could not recover fees and costs for unreasonable agency action related to the individual. The court neither articulated nor applied a substantially affected test or related business test. The court did not state that unreasonable agency action based on an unsubstantiated report of medical neglect against the individual either substantially affected or related to the business of the individual. Rather, the court found that the individual and her business were one and the same entity and disregarded any legal distinction between the two for purposes of the small business party test. Compare Ann & Jan Retirement Villa, Inc., 12 FALR at 1544-1545 (in which the Hearing Officer found that allegations of medical neglect related only to the individual and not to the

    entity) with Ann & Jan Retirement Villa, Inc., 580 So.2d at

    280 (in which the court found that agency action based on an unsubstantiated report of medical neglect was not substantially justified).

    
    

48. The result in Ann & Jan Retirement Villa, Inc. would have been the same if the court had articulated and applied a substantially affected test or related business test. The fact that the court declined to do so, under the facts in that case, is a distinction without a difference. In license application proceedings, however, it is a distinction with a significant difference. A rule which disregards the legal distinction between an individual and his or her business when the two are one and the same entity effectuates legislative intent not to exclude license application proceedings from eligibility for fees and costs. It also effectuates legislative intent to require the applicant to be engaged in a business. Conversely, a substantially affected test or related business test would accomplish indirectly that which the legislature declined to do directly.

    
    

49. A rule which disregards the legal distinction between an individual and his or her business when the two are one and the same entity gives force and effect to the purpose of Section 57.111, Florida Statutes. The legislature found in Section 57.111(2)(a) that:

    
    

    . . . certain persons may be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense of civil actions and administrative proceedings. . . . The purpose of this section is to diminish the deterrent effect of seeking review of, or defending against, governmental action by providing in certain situations an award of attorney's fees and costs against the state.

    
    

50. The purpose of Section 57.111, Florida Statutes, is an economic purpose. Section 57.111 is intended to diminish the economic deterrent which may arise from the expense of challenging unreasonable governmental action in civil or administrative proceedings. Section 57.111(2); Accord Jory, 583 So.2d 1075, supra (holding that the requirements for domicile and office location are reasonably related to the state's economic interests and

    that the state's financial resources would otherwise become available to nonresidents who do not aid the state's economy or replenish the state's coffers by paying taxes); City of Naples Airport Authority v. Collier Development Corporation, 515 So.2d 1058, 1059-1060 (Fla. 2d DCA 1987) (holding, in effect, that the purpose of Section 57.111 is to provide assistance to certain parties who otherwise would find it too expensive to oppose unreasonable agency action). Once an individual conducting business in an authorized business format has met the domicile and office location requirements, the remaining test for a small business party is an economic test. The remaining test pertains exclusively to the number of employees and net worth of the individual seeking to qualify as a small business party (the "economic test").

    
    

51. The economic test for a small business party does not require the business of an individual claiming fees and costs to be a party to the underlying proceeding, to be substantially affected by unreasonable agency action in the underlying proceeding, or to be related to such action.

    Ann & Jan Retirement Villa, Inc., 580 So.2d at 280; Gentele, 9 FALR at 323; Miller, 10 FALR at 5166. Rather, the economic test requires an individual claiming fees and costs to have no more than 25 employees and a net worth of no more than $2 million, including personal and business assets, at the time agency action is initiated in the underlying proceeding. Personal and business assets are not legislatively confined to assets that satisfy a substantially affected test or related business test.

    Rather, the statute includes personal and business assets in all businesses.

    
    

52. An implied substantially affected test or related business test in the definition of a small business party would frustrate the economic purpose for Section 57.111, Florida Statutes. It would exclude from the definition of a small business party "certain persons" whose businesses fail either test but who are substantially affected individually by the underlying proceeding, who prevailed in that proceeding, who satisfy the express economic test for a small business party, who are one and the same with their businesses, and who the legislature found:

    
    

    . . . may be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense of

    . . . administrative proceedings. . . .

    
    

    Section 57.111(2), Florida Statutes.

    
    

53. A substantially affected test or related business test does not occur by necessary implication or operation of constitutional law. While there is no jurisdiction in this proceeding to determine the constitutionality of a statute, the undersigned is required, if possible, to construe applicable statutes in a way that preserves their constitutionality. Novo v. Scott, 438 So.2d 477, 478 (Fla. 3d DCA 1983) (citing Myers v. Hawkins, 362 So.2d 926 (Fla. 1978) and State v. McDonald, 357 So.2d 405 (Fla. 1978) for the cited proposition).

    
    

54. Section 57.111, Florida Statutes, is not a penal statute. It is not intended to impose a fine or penalty on either state agencies or individuals. It does not employ suspect classifications or impinge on fundamental rights. Rather, the statute is economic or commercial legislation ("economic legislation"). It seeks to diminish the economic deterrence which may arise from the cost of challenging unreasonable agency action for "certain persons" who qualify as a small business party.

    
    

55. Economic legislation that does not employ suspect classifications or impinge on fundamental rights must be upheld when the legislative means are rationally related to a legitimate governmental purpose. Hodel v. Indiana, 452 U.S. 306, 332, 101 S.Ct. 2376, 2387, 69 L.Ed.2d 40 (1981). More significantly for the purposes of this proceeding, such legislation enjoys a presumption of rationality that can only be overcome by a clear showing that it is arbitrary and irrational. Id,.

    
    

56. The interpretation of Section 57.111, Florida Statutes, in this proceeding does not discriminate unconstitutionally against large businesses. See Smith v. Department Of Insurance, 507 So.2d 1080, 1093 (Fla. 1987). In Smith, 597 So.2d at 1093, legislation prohibiting certain insurance companies from retaining excess profits did not deprive those companies of their constitutional right to equal protection.

    
    

57. Commercial legislation that neither employs suspect classifications nor impinges on fundamental rights may constitutionally discriminate against individuals or

    businesses. Exxon Corporation v. Eagerton, 462 U.S. 176, 195, 103 S.Ct. 2296, 2308, 76 L.Ed.2d. 497 (1983). Section

    57.111, Florida Statutes, has been judicially construed to preclude individual employees from qualifying as a small business party. Thompson v. Department Of Health And Rehabilitative Services, 533 So.2d 840, 841 (Fla. 1st DCA

    1988). 7/

    
    

58. An interpretation of Section 57.111, Florida Statutes, which permits discrimination against certain individuals does not deprive such individuals of their constitutional right to equal protection. In Exxon Corporation, 462 U.S. at 195, commercial legislation in Alabama prohibited corporations from passing severance taxes on to consumers but exempted individual owners from the pass-through prohibition. The court held that such legislation does not deprive corporations of their constitutional right to equal protection.

    
    

59. An individual seeking to qualify as a small business party in the proceeding for fees and costs is not required to be subject to the jurisdiction or legal authority of the agency initiating unreasonable action. A contrary rule would preclude an individual who otherwise qualified as a small business party from recovering fees and costs where the agency was shown, after considerable expense in the underlying proceeding, to have acted without jurisdiction or authority. For the same reason, the business of such an individual is not required to be subject to the jurisdiction or legal authority of an unreasonable agency in order for the individual to qualify as a small business party in Section 57.111(3)(d), Florida Statutes.

    
    

60. The legislature intended to provide the economic benefits available in Section 57.111, Florida Statutes, to individuals who satisfy the requirements for domicile and office location, who conduct their businesses in any authorized business format, who prevail in license application proceedings involving unreasonable agency action, who qualify under the economic test for a small business party, and who are one and the same entity with their businesses. Petitioner, his wife, and WDS meet the requirements for domicile and office location. Petitioner conducted his financial consulting business in an authorized business format. Petitioner and WDS were one and the same entity when Respondent initiated unreasonable

    agency action. Finally, Petitioner satisfied the economic test for a small business party directly and by attribution from his wife, WDS, and his other business activities.

    
    

61. Cases holding that a real estate sales agent is not a small business party are factually distinguishable and not determinative in this proceeding. In Toledo Realty, Inc., 549 So.2d at 716, for example, a person claimed fees and costs for a license revocation proceeding initiated against his real estate sales license. The claim for fees and costs was denied. The court determined that the licensed real estate agent was an employee at the time agency action was initiated and that an employee does not qualify as a small business party. Unlike the facts in Toledo Realty, Inc., Petitioner was neither a licensed real estate agent nor an employee of any entity, except WDS, when unreasonable agency action was initiated against him. The legislature declined to exclude license application proceedings from Section 57.111, Florida Statutes. Home Health Care Of Bay County, 10 FALR at 5177.

    
    

62. The court in Toledo Realty, Inc. found that the "evidence supports" the determination of the Hearing Officer that the real estate agent was an employee. A determination of whether an agent is an employee subject to the control of another person or an independent contractor merely directed by another person is a question of fact to be determined based on the facts and circumstances in each case. Magarian v. Southern Fruit Distributors, 1 So.2d 858 (Fla. 1941). Relevant facts and circumstances include a determination of whether the individual receives insurance coverage such as life, health, accident, or professional liability insurance from the putative employer. Moles v. Gotti, 433 So.2d 1380, 1382 (Fla. 2d DCA 1983). Other relevant inquiries are whether payroll deductions are taken for withholding and social security taxes and for workers' compensation coverage. Azad v. United States, 388 F.2d 74 (8th Cir. 1968).

    
    

63. Credible and persuasive evidence in this proceeding shows that Petitioner has been employed as an independent sales agent by RET since October 7, 1992. Section 475.01(1)(d), Florida Statutes, defines a "salesperson" as a person who is under the ". . . direction, control, or management of another person. "

    Petitioner failed to present evidence of any particular

    facts and circumstances establishing Petitioner as an independent contractor.

    
    

    Not Substantially Justified

    
    

64. Respondent failed to satisfy its burden of proof in this proceeding. Respondent failed to show that it was substantially justified in denying Petitioner's application for a license on April 25, 1991. Respondent failed to show that there was any basis in law or fact for the action initiated by Respondent.

    
    

65. Respondent showed only that Petitioner was a named defendant in civil litigation. There was no showing that Respondent conducted an independent factual determination of the truthfulness or credibility of the allegations in the civil litigation. Compare, Ann & Jan Retirement Villa, Inc., 580 So.2d at 280, supra (holding that refusal to renew a license on the basis of an unsubstantiated report of medical neglect was not substantially justified when there was no reasonable investigation conducted to substantiate the report), with, Gentele, 518 So.2d 672, supra (holding that the evidence showed that the state's determination to prosecute turned on its assessment of the credibility of the testimony of its investigator). Respondent cited no legal authority for the proposition that being named in civil litigation is a sufficient basis for denial of a license application. Therefore, Respondent's denial of Petitioner's license application had no basis in either law or fact within the meaning of Section 57.111(3)(e), Florida Statutes.

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, it is

ORDERED that Petitioner is entitled to attorney fees and costs in the respective amounts of $7,465.00 and

$585.30, together with applicable interest, if any, and that Respondent shall pay the same to Petitioner forthwith.

DONE AND ENTERED this 24th day of May, 1993, at Tallahassee, Florida.

Hearings

1550

Hearings

DANIEL S. MANRY

Hearing Officer

Division of Administrative

The DeSoto Building 1230 Apalachee Parkway

Tallahassee, Florida 32399-

(904) 488-9675

Filed with the Clerk of the Division of Administrative

this 24th day of May, 1993.

ENDNOTES

1/ No evidence was presented that WDS is no longer in existence or that its principal office is now located in another state. However, the evidence showed that Petitioner began working as an independent real estate agent on October 7, 1992.

2/ No evidence was presented that WDS is no longer in existence or that its principal office is now located in another state.

3/ Even if Petitioner's other business activities are taken into account after agency action was initiated, Petitioner had no more than 25 employees and a net worth of

no more than $2 million, including both personal and business investments, either directly or by attribution from his wife, WDS, and his other business activities.

4/ While not explicitly stated in Ann & Jan Retirement Villa, Inc., v. Department Of Health And Rehabilitative Services, 12 FALR 1541, 1542-1543 (DOAH Case No. 89-6186F,

Final Order entered on March 20, 1990), the appellate opinion reveals that the license to operate the corporation had been issued to the owner in her individual capacity and that the individual licensee owned all of the stock of the corporation. Ann & Jan Retirement Villa, Inc., 580 So.2d at 279 and 281.

5/ Petitioner is required by the state to maintain his real estate license with a licensed real estate broker for a prescribed period of time. After that, Petitioner is eligible to obtain his real estate broker license. If he does obtain a broker license, he can utilize that license as an integral part of his financial consulting business conducted through WDS.

6/ The requirement that the individual and his or her business must be one and the same entity, in effect, requires the individual to actively engage in the conduct of a trade or business. It effectively excludes business activities in which the individual's control, management, or other active participation in the business is so remote or diluted that he may reasonably be found to be engaged in either a passive business activity such as a limited partnership or an investment activity. The extent to which an individual's interest in an active business may be diluted before the individual is no longer considered to be engaged in the active conduct of a trade or business depends upon the facts and circumstances in each case.

Some factors that may be considered include active management control, percentage of stock ownership, dual clases of stock, voting rights within each class, majority or controlling voting power, debt guarantees by stockholders, and stockholder agreements.

7/ Decisions precluding certain employees from recovering fees and costs under Sec. 57.111, Fla. Stat., may not, on their facts, preclude other employees who operate as a partnership or corporation from recovering fees and costs under Section 57.111. For example, an employee may be: a professional corporation employed by a professional

corporation or partnership; a general partner of either a general or limited partnership; and an employee of a corporation in which the two are one and the same. See, e.g., Ann & Jan Retirement Villa, Inc., 580 So.2d at 280.

APPENDIX TO FINAL ORDER, CASE NO. 92-3223F

Petitioner's Proposed Findings of Fact

1. Accepted in Finding 1.

2. Accepted in Findings 1. and 12.

3. Accepted in Findings 5.,6.,8., and 9.

4. Accepted in Finding 10.

Respondent's Proposed Findings of Fact

1. Accepted in Finding 1.

2. Accepted in Findings 1. and 12.

3. Accepted in Finding 3.

4. Rejected as irrelevant and immaterial 5.-7. Rejected as recited testimony

1. Rejected in Finding 7.

2. Rejected in Conclusion 15.

3. Rejected as irrelevant and immaterial 11.-13. Accepted in Finding 2.

14. Rejected in Findings 11.and 12. and Conclusions 64-65.

15.-24. Rejected in Finding 13.

COPIES FURNISHED:

Joel Hirschhorn, Esquire

2600 Douglas Road, Penthouse One Coral Gables, Florida 33134

Manuel E. Oliver, Esquire Assistant Attorney General Department of Legal Affairs Suite 107 South Tower

400 West Robinson Street Orlando, Florida 33040

Darlene F. Keller, Division Director Division of Real Estate

400 West Robinson Street

Post Office Box 1900 Orlando, Florida 32802-1900

Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO JUDICIAL REVIEW

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 days of rendition of the order to be reviewed.

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DISTRICT COURT OPINION

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APPEAL FLORIDA

IN THE DISTRICT COURT OF FIRST DISTRICT, STATE OF

FLORIDA REAL ESTATE COMMISSION, NOT FINAL UNTIL TIME EXPIRES TO

AND

FILE MOTION FOR REHEARING

Appellant, DISPOSITION THEREOF IF

FILED

v. CASE NO. 93-1929

DOAH CASE NO. 92-3223F

WALTER D. SHEALY, III,

Appellee.

/ Opinion filed May 25, 1994.

An appeal from Division of Administrative Hearings. Robert

A. Butterworth, Attorney General, and Manuel E. Oliver, Assistant Attorney General, Orlando, for Appellant. Joel Hirschhorn and Robert M. Einhorn of Joel Hirschhorn, P.A., Coral Gables, for Appellee.

ALLEN, J.

The Florida Real Estate Commission appeals an order by which the appellee was awarded an attorney's fee under section 57.111, Florida Statutes. Because the appellee was not a small business party as required by the statute, the appealed order must be reversed.

The Commission initially denied the appellee's application for a real estate sales license. The appellee challenged this action and prevailed in an administrative proceeding, eventually obtaining licensure. The appellee then sought a section 57.111 attorney's fee, which may be recovered by a prevailing small business party. The appellee indicated that he desired the license for work which he intended to perform on behalf of a corporation wholly owned by himself and his spouse. However, the corporation was not a party to any of the proceedings below, and the appellee appeared in his individual capacity.

Section 57.111 authorizes an attorney's fee for a qualifying small business party, which must be a corporation, a partnership, or a sole proprietor of an unincorporated business. See s. 57.111(3)(d)1.a. and b, Fla. Stat. This does not encompass individual employees. Department of Professional Regulation v. Toledo Realty, 549 So. 2d 715 (Fla. 1st DCA 1989); Thompson v. Department of Health and Rehabilitative Services, 533 So. 2d 840 (Fla.

1st DCA 1988). Although the appellee and the corporation

were found to be "one and the same entity" based on the appellee's control of the business, the statute does not permit such disregard of the corporate form. 1/ The appellee was not a small business party as defined by the statute, and he thus should not have been awarded a section

57.111 attorney's fee.

The appealed order is reversed.

BARFIELD and WOLF, JJ., CONCUR

ENDNOTE

1/ This case is unlike Ann & Jan Retirement Villa v. Department of Health and Rehabilitative Services, 580 So. 2d 278 (Fla. 4th DCA 1991), where a corporation and its sole owner were described as "one and the same entity." In Ann & Jan the corporation, rather than the individual, was awarded the attorney's fee.

M A N D A T E

From

DISTRICT COURT OF APPEAL OF FLORIDA FIRST DISTRICT

To the Honorable, Daniel S. Manry, Hearing Officer

Division Of Administrative Hearings WHEREAS in that certain cause filed in this Court styled:

WALTER D. SHEALY, III

vs. Case No. 93-1929

Your Case No. 92-3223F

FLORIDA REAL ESTATE COMMISSION

The attached opinion was rendered on May 25, 1994.

YOU ARE HEREBY COMMANDED that further proceedings he had in accordance with said opinion, the rules of this Court and the laws of the State of Florida.

WITNESS the Honorable E. Earle Zehmer

Chief Judge of the District Court of Appeal of Florida, First District and the Seal of said court at Tallahassee, the Capitol, on this 10th day of June, 1994.

Clerk, District Court of Appeal of Florida, First District

Docket for Case No: 92-003223F

Orders for Case No: 92-003223F