STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GULF COAST DEVELOPMENT SERVICE, INC.,

Petitioner,

vs.

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Respondent.

/

Case No. 13-1977F

FINAL ORDER

Pursuant to notice, a final hearing was held in this case on October 25, 2013, in Tallahassee, Florida, before Administrative Law Judge, Linzie F. Bogan, of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Thomas L. Dickens, Esquire

Dickens and Dunn, P.L.

517 East College Avenue Tallahassee, Florida 32301

For Respondent: Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

Whether Respondent, Department of Financial Services, Division of Workers' Compensation (Department or Respondent),

should pay Petitioner, Gulf Coast Development Service, Inc.'s (Petitioner or Gulf Coast Development), attorney's fees and costs under section 57.111, Florida Statutes (2012),1/ for initiating Division of Administrative Hearings (DOAH) Case No. 13-0798.

PRELIMINARY STATEMENT

The parties hereto were litigants in the case of Department of Financial Services, Division of Workers' Compensation v. Gulf

Coast Development Services, Inc., DOAH Case No. 13-0798. The underlying prosecution was dismissed by the Department, and Gulf Coast Development seeks, in the instant matter, an award of attorney's fees and costs pursuant to section 57.111.

During the final hearing, Petitioner offered testimony from Brian Fischer, Quang Dinh, and Belinda Milton. Respondent offered testimony from Leida Perez, Ralph Douglas, Jr., and Kristian Dunn. Respondent's counsel testified as to limited matters pertaining to the amount of fees sought by Petitioner and was subject to cross examination. Petitioner's Exhibits 1 and 2 were admitted into evidence. Respondent's Exhibits 1 through 4, 6, 11 and 15 were also admitted into evidence.

A Transcript of the proceeding was filed with DOAH on November 7, 2013. On November 18, 2013, the parties each filed a proposed final order, and the same were considered in the preparation of this Final Order.

FINDINGS OF FACT

1. The parties stipulated to the following facts set forth in this paragraph:

   1. The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees and corporate officers.

   2. Petitioner, a Florida corporation, was engaged in the Florida construction industry on February 12, 2013.

   3. On February 12, 2013, Leida Perez, workers' compensation compliance investigator for the Department (Investigator Perez), commenced an investigation at 577 Gulfshore Boulevard, Naples, Florida 34102 (job site), to determine whether the individuals performing construction industry work at the job site were compliant with the workers' compensation insurance coverage requirements of chapter 440, Florida Statutes.

   4. Quang Dinh is the owner and corporate officer of Gulf Coast Development.

   5. The Department issued a Stop-Work Order and Order of Penalty Assessment to Petitioner on February 12, 2013.

      
      

   6. The Department served a Request for Production of Business Records for Penalty Assessment Calculation to Petitioner on February 12, 2013.

   7. The calculations and the methodology applied by the Department's penalty auditor in the Amended Order of Penalty Assessment that was issued to Petitioner by the Department on February 27, 2013, and revoked on May 3, 2013, are not in dispute. Petitioner does not owe any Amended Order of Penalty Assessment to the Department.

   8. Bob Simat, drywall supervisor for Advantage Plastering and Finish Carpentry, contacted Gilberto Zepeda directly to perform the drywall operations at the job site. Mr. Simat was under the impression that Mr. Zepeda and his brother both worked for Gulf Coast Development.

   9. Discovery in this matter concluded on April 29, 2013, when the Department received check images from Petitioner's bank account.

   10. The Department issued and served an Order Releasing Stop-Work Order (Revocation) to Petitioner on May 3, 2013.

   11. Petitioner is a bona fide "small business" and incurred legal fees and costs for this action.

       
       

   12. The Department revoked the February 12, 2013, Stop-Work Order, and, therefore, Petitioner is the prevailing party in the underlying action within the meaning of section 57.111(3)(c).

2. On February 12, 2013, when Investigator Perez arrived at the job site, she observed Gilberto and Enrique Zepeda (Zepedas) performing drywall finishing work. Upon inquiry, the Zepedas informed Investigator Perez that they were performing the drywall finishing work for their employer, Gulf Coast Development, and provided her with Quang Dinh's cellular phone number.

3. As previously noted, Investigator Perez is an investigator with the Department's Division of Workers' Compensation. When Investigator Perez arrived at the job site on February 12, 2013, a representative from the Department's Division of Insurance Fraud (Fraud Unit) was also present. In the presence of Investigator Perez, the representative from the Fraud Unit received from the Zepedas the same information that they provided to Investigator Perez regarding their employment status with Gulf Coast Development. While meeting with Investigator Perez and the representative from the Fraud Unit, the Zepedas memorialized their verbal statements by each executing an affidavit, and affirmatively stating therein that they were employed by Petitioner.

   
   

4. Soon after receiving Mr. Dinh's phone number from the Zepedas, Investigator Perez phoned Mr. Dinh. When Mr. Dinh answered his phone, Investigator Perez identified herself and explained that she was with the Zepeda brothers. During the conversation with Mr. Dinh, Investigator Perez asked whom he used for workers' compensation coverage. Mr. Dinh replied "I am working on it," and the phone was disconnected. Investigator Perez immediately placed a second call to Mr. Dinh, and it was during this conversation that Mr. Dinh agreed to meet her at the job site.

5. After speaking with Mr. Dinh, Investigator Perez contacted Advantage Plastering, a contractor at the job site, who informed her that they had hired Petitioner to perform the drywall finishing work.

6. Following her conversation with the representative from Advantage Plastering, Investigator Perez, through the use of her mobile personal computer, searched the Department of State, Division of Corporations', website database (Sunbiz) for information on Gulf Coast Development.

7. The information found on Sunbiz showed that Petitioner had been an active Florida corporation since May 9, 2007, that 27614 Imperial Shore Boulevard, Bonita Springs, Florida 34134, was the company's principal address, and that Quang Dinh was president of the corporation.

   
   

8. Next, Investigator Perez checked the Department's Coverage and Compliance Automated System (CCAS) for information on proof of coverage and exemptions for Petitioner. CCAS revealed that Petitioner did not have any active coverage, but did have an exemption for Mr. Dinh.

9. An exemption is a method by which a particular corporate officer can become exempt from the requirement to obtain workers' compensation insurance coverage, as authorized by section 440.05, Florida Statutes.

10. When Mr. Dinh arrived at the job site, Investigator Perez again asked him about the company's current workers' compensation coverage, to which Mr. Dinh again replied, "I am working on it." Mr. Dinh then gave Investigator Perez a folder containing a blank application for workers' compensation insurance coverage.

11. Based on her interviews with the Zepedas, Advantage Plastering, and Mr. Dinh, along with the information obtained from Sunbiz and CCAS, Investigator Perez determined that the Zepeda brothers were employed by Petitioner and that the Zepedas were not covered by workers' compensation insurance coverage. Given this information, Investigator Perez issued Petitioner a Stop-Work Order.

12. Mr. Dinh testified that when he arrived at the job site, he informed Investigator Perez that the Zepedas were not

    
    

    his employees. Even if Mr. Dinh informed Investigator Perez that the Zepedas were not employees of Gulf Coast Development, his assertion was insufficient to negate the verbal and sworn statements given to Investigator Perez by the Zepedas and, moreover, conflicted with his previous statements to Investigator Perez that he was "working on" getting workers' compensation coverage for the Zepedas.

13. In March 2013, the Zepedas recanted their earlier statements that they were employed by Gulf Coast Development. On May 3, 2013, Respondent issued an Order Releasing Stop-Work Order (Revocation).

14. The facts uncovered in Investigator Perez's investigation on February 12, 2013, provided the Department with a reasonable basis to issue the Stop-Work Order to Petitioner.

    CONCLUSIONS OF LAW

    
    

15. DOAH has jurisdiction in this proceeding pursuant to sections 57.111(4), 120.569, and 120.57(1), Fla. Stat. (2013).

16. Section 57.111, the Florida Equal Access to Justice Act, authorizes the award of attorney's fees and costs to a small business party that prevails in an administrative proceeding seeking review of or defending against unreasonable government action by a state agency, i.e., when the state agency's actions are not substantially justified and no special circumstances exist that would make the award unjust. Section 57.111(3)(e)

    
    

    defines substantial justification as a reasonable basis in fact and law.

17. The agency has the burden to prove substantial justification. AHCA v. MVP Health, Inc., 74 So. 3d 1141, 1143 (Fla. 1st DCA 2011); Helmy v. Dep't of Bus. and Prof'l Reg., 707 So. 2d 366, 368 (Fla. 1st DCA 1998).

18. It was held in AHCA v. MVP Health, Inc., supra, at 1143-44:

    [A]n agency cannot satisfy the "substantial justification" standard simply by showing an action was "not frivolous." This is because "while governmental action may not be so unfounded as to be frivolous, it may nonetheless be based on such an unsteady foundation factually and legally as not to be substantially justified." Dep't of Health & Rehab. Servs. v. S.G., 613 So. 2d 1380, 1386 (Fla. 1st DCA 1993). On the

    other hand, the standard is not so strict as to require the agency to demonstrate that its action was correct. Id., quoting McDonald v. Schweiker, 726 F.2d 311, 316 (7th Cir. 1983)(stating the government need not have a "necessarily correct basis [] for the position that it took"). The "substantial justification" standard lies between these two extremes. The closest approximation is that if a state agency can present an argument for its action "'that could satisfy a reasonable person[,]'" then that action should be considered "substantially justified." Helmy, 707

    So. 2d at 368, quoting Pierce v. Underwood, 487 U.S. 552, 565, 108 S. Ct. 2541, 101 L.

    Ed. 2d 490 (1998).

    
    

    An additional consideration when evaluating an agency's action under section 57.111 is that the inquiry is limited only to whether the agency had a "reasonable basis in law

    
    

    and fact at the time" it took the action.

    § 57.111(3)(e), Fla. Stat. (2010) . . . .

    (emphasis [in original]). The reviewing body--whether DOAH or a court--may not consider any new evidence which arose at a fees hearing, but must focus exclusively upon the information available to the agency at the time that it acted. See Dep't of Health, Bd. of Physical Therapy Practice v. Cralle, 852 So. 2d 930, 932 (Fla. 1st DCA 2003)(criticizing an ALJ for being "influenced by consideration of evidence which was presented at [a fees] hearing rather than being focused solely on whether the [agency's underlying] decision had a reasonable basis in law and fact").

    
    

19. Using this legal standard, there was, on February 12, 2013, substantial justification for the decision by Respondent to issue a Stop-Work Order to Petitioner.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the petition for attorney's fees and costs is denied.

DONE AND ORDERED this 6th day of December, 2013, in Tallahassee, Leon County, Florida.

S

LINZIE F. BOGAN

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 6th day of December, 2013.

ENDNOTE

1/ All subsequent references to Florida Statutes will be to 2012, unless otherwise indicated.

COPIES FURNISHED:

P.K. Jameson, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307

Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0390

Alexander Brick, Esquire Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399

Thomas L. Dickens, Esquire Dickens and Dunn, P.L.

517 East College Avenue Tallahassee, Florida 32301

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 the original notice of administrative appeal with the agency clerk of the Division of Administrative Hearings within 30 days of rendition of the order to be reviewed, and a copy of the notice, accompanied by any filing fees prescribed by law, with the clerk of the District Court of Appeal in the appellate district where the agency maintains its headquarters or where a party resides or as otherwise provided by law.

Docket for Case No: 13-001977F

Orders for Case No: 13-001977F