STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
PLASTIC TUBING INDUSTRIES, INC.,
vs.
Petitioner,
Case No. 14-3960
ADVANCED DRAINAGE SYSTEMS, INC., AND DEPARTMENT OF HEALTH,
Respondents.
/
RECOMMENDED ORDER
On October 13 and 14, 2014, Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings (DOAH), conducted the final hearing in Tallahassee, Florida.
APPEARANCES
For Petitioner: David C. Ashburn, Esquire
Greenburg Traurig, P.A.
101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32302
For Respondent Advanced Drainage Systems, Inc.:
Joseph R. Miller, Esquire Vorys, Sater, Seymour
and Pease, LLP
52 East Gay Street Columbus, Ohio 43215
Daniel E. Nordby, Esquire Shutts & Bowen LLP
215 South Monroe Street, Suite 804 Tallahassee, Florida 32301
For Respondent Department of Health:
Amanda G. Bush, Esquire Department of Health
4052 Bald Cypress Way, BIN A-02 Tallahassee, Florida 32399-1703
STATEMENT OF THE ISSUES
The issues are whether Petitioner's substantial interests are determined by the issuance of the subject variance to Respondent Advanced Drainage Systems, Inc. (ADS) for the sale of an alternative drainfield system in Florida and whether, pursuant to section 120.542, Florida Statutes, on the grounds of substantial hardship or unfairness, ADS is entitled to this variance from three provisions of Florida Administrative Code Rule 64E-6.009(7) that, as to onsite sewage treatment and disposal systems (OSTDSs), require innovative system testing and prohibit an alternative drainfield system with an area smaller than the area required for a mineral-aggregate drainfield.
PRELIMINARY STATEMENT
On March 25, 2014, ADS filed a Petition for Variance (Petition). After Respondent Department of Health (DOH) requested additional information, ADS filed a Revised Petition for Variance on April 21, 2014 (Revised Petition).
The Revised Petition requests variances from three provisions of Florida Administrative Code Rule 64E-6.009(7). The three provisions are rule 64E-6.009(7), which, according to the
parties, impliedly requires "innovative system testing" to precede any approval by DOH of an OSTDS alternative system; rule 64E-6.009(7)(a)4., which requires the submittal to DOH of "empirical data" from "innovative system testing" prior to DOH's approval of an OSTDS alternative system; and rule
64E-6.009(7)(d), which prohibits the use of an alternative drainfield system with an area smaller than the area required for a mineral-aggregate drainfield specified in rule 64E-6.014.
The requested variance would allow ADS to sell in Florida, without innovative system testing, an alternative drainfield system with an area smaller than the area required for a mineral- aggregate drainfield. The Revised Petition states that the proposed alternative drainfield system is similar to an alternative drainfield system that has been installed in Florida for ten years and has functioned adequately. The Revised Petition claims that additional testing of the proposed alternative drainfield system is thus unnecessary, would be unfair, and would constitute a substantial hardship.
By Order Granting Petition for Variance filed July 15, 2014 (Variance Order), DOH granted the requested variance from rule 64E-6.009(7), 64E-6.009(7)(a)4., and 64E-6.009(7)(d) on the
grounds that requiring ADS to comply with this rule would be unfair and present a substantial hardship. The Variance Order declined to grant a variance from the requirement in rule
64E-6.009(7)(e) requiring the labeling of product components because the proposed alternative drainfield product would meet this requirement.1/ Lastly, the Variance Order determines that the purpose of the underlying statute--section 381.0065--will be met because ADS's proposed alternative drainfield system would be "functionally equivalent" to a previously approved alternative drainfield system that has been installed in Florida for several years.
The product of a free-form agency proceeding,2/ the Variance Order comprises 11 numbered paragraphs of findings of fact and five numbered paragraphs of conclusions of law. The first three paragraphs of findings of fact recite the three subject rule provisions for which the variance is sought. The remaining findings of fact briefly describe ADS's proposed "alternative drainfield product"3/ for which ADS seeks the variance, the successful performance in Florida of a similar alternative drainfield system, and ADS's claim that requiring further testing of its alternative drainfield system would thus be unfair and present a substantial hardship.
The first two conclusions of law recite provisions of sections 120.542 and 381.0065, which are discussed in the Conclusions of Law. The remaining conclusions of law have been discussed above. The Variance Order grants the requested variance from the three rule provisions on the condition that ADS
offer a "limited warranty" on its alternative drainfield system.4/ Regarding the variance from the rule provision governing the size of drainfields, the Variance Order mandates that ADS's alternative drainfield system will receive a rating equivalent to three square feet of mineral-aggregate drainfield per linear foot of pipe.
By Petition for Formal Administrative Proceedings filed August 6, 2014 (Petition), Petitioner challenged the proposed variance. The Petition alleges that the Variance Order must be set aside for several reasons: 1) DOH published notice of the Original Petition, but not the Revised Petition, thus depriving Petitioner of an opportunity to be heard on the Revised Petition;
2) the Variance Order fails to comply with section 381.0065(3)(e), which authorizes DOH to permit the use of a "limited number" of innovative drainfield systems for a "limited period of time," if "compelling evidence" establishes that the subject OSTDS will function properly and reliably to meet the requirements of this section and the rules adopted pursuant to this section; and 3) the Variance Order unlawfully waives the requirements of section 381.0065(3)(e), which requires that an applicant seeking approval of an innovative system comply with all rule requirements.
The Petition alleges that Petitioner's substantial interests are determined by the Variance Order in two respects. First,
Petitioner alleged that it will be forced to compete with ADS under unfair circumstances arising from the failure of DOH to require ADS to incur the substantial costs of innovative system testing necessary to comply with rule 64E-6.009.5/ Second, Petitioner alleged that, as a member of the public, it will suffer environmental harm from DOH's failure to require ADS to subject its proposed alternative drainfield system to innovative system testing and unspecified other rule requirements that protect the water resources.
In its Response to ADS's Motion to Dismiss filed on September 12, 2014, Petitioner also argued that its substantial interests are determined by the limitation on the number of innovative systems authorized by section 381.0065(3)(e) and the addition of ADS's innovative systems, if it obtains the variance.
In the Joint Pre-hearing Stipulation filed on October 7, 2014, Petitioner identified the issues presented for determination as the failure of ADS to have demonstrated that "the purpose of the underlying statute will be or has been achieved by other means . . . and [the] application of the rule [from which the variance is sought] would create a substantial hardship or would violate principles of fairness." Petitioner also recited the standing allegations described above.
In the Joint Pre-hearing Stipulation, ADS argued that the Variance Order is "supported by competent substantial evidence"
based on DOH's "detailed investigation" and "proper evaluation" of the Revised Petition. ADS also contended that Petitioner lacks standing.
In the Joint Pre-Hearing Stipulation, DOH noted that the Variance Order is "based on competent substantial evidence," and the variance is not a variance from the underlying statute because ADS's proposed alternative drainfield system is not an innovative system.6/
The Joint Pre-hearing Stipulation identifies the agreed-upon factual issues as whether Petitioner's substantial interests are determined by the Variance Order and whether competent substantial evidence supports DOH's determinations that:
ADS's proposed alternative drainfield system is functionally equivalent to Petitioner's already-tested alternative drainfield system, 2) the purpose of the statute underlying the three rule provisions from which the variance is sought will be met by means other than enforcement of these rule provisions, 3) the enforcement of these rule provisions would be unfair or cause substantial hardship, 4) DOH should grant the requested variance, and 5) DOH should approve ADS's proposed alternative drainfield product.
At the start of the hearing, the parties agreed that the burden of proof rests with Petitioner to prove that DOH's determinations were not supported by competent substantial
evidence. As explained in the Conclusions of Law, the Administrative Law Judge rejects this stipulation because it is an erroneous statement of the law.7/
At the hearing, Petitioner called four witnesses and offered into evidence four exhibits: Petitioner Exhibits A, B, D, and E. ADS called three witnesses and offered into evidence 38 exhibits: ADS Exhibits A through F; G-1 through G-8 and G-13 through G-21; and H through R. DOH called two witnesses and offered into evidence 14 exhibits: DOH Exhibits A through N. The parties offered six joint exhibits: Joint Exhibits A through F. All exhibits were admitted.8/
The court reporter filed the transcript on October 29, 2014.
The parties filed proposed recommended orders on November 10, 2014.
FINDINGS OF FACT
In the mid-1990s, Petitioner developed a drainfield system known as a Multi-Pipe System (MPS) as an alternative to the standard mineral-aggregate drainfield. The MPS consists of nine, eleven, or thirteen banded pipes constructed of four-inch, corrugated, high-density polyethylene tubing. Installed downgradient from a septic tank, the MPS retains the effluent from the septic tank long enough for the oxygen in the soil to treat the effluent's anerobic bacteria. After retaining the effluent long enough for this treatment to take place, the MPS
releases the effluent so it can percolate deeper into the ground below the bottom of the drainfield.
Marketed as a space-saving alternative to a mineral- aggregate drainfield, the drainfield area of the MPS is less than the minimum drainfield area specified by rule 64E-6.008 for a standard mineral-aggregate drainfield. For this reason, Petitioner sought DOH's approval of the MPS as an alternative drainfield system under rule 64E-6.009 (Alternative System or, more specifically, Alternative Drainfield System).
In addition to being a proposed Alternative System, the MPS was also an "innovative system," as referenced in rule
64E-6.009(7), so DOH required Petitioner to conduct over two years' innovative system testing and submit to DOH the empirical data obtained from this testing. Petitioner did so, and DOH approved the MPS, with its reduced-size drainfield area, for sale and installation in Florida.
A relatively small company, Petitioner entered into a license agreement with ADS in 2001 for the latter to produce and market the MPS in Florida. ADS subsequently sold at least 10,000 MPSs from 2001 until 2011 when the license agreement terminated. After Petitioner's patent on the MPS expired in 2014, ADS sought approval from DOH to market its own version of the MPS known as the Septic Stack.
The Petition, Revised Petition, and Variance Order have been described above in the Preliminary Statement. DOH published notice of its receipt of the Petition in the Florida Administrative Register. Although DOH did not publish notice of its receipt of the Revised Petition, it did publish notice of the Variance Order in the Florida Administrative Register. The Variance Order provides persons whose substantial interests are determined by the proposed order a point of entry for requesting an administrative hearing on material issues of fact. Nothing in the record suggests that a third party had any right or opportunity to participate in the free-form agency proceeding that preceded the issuance of the Variance Order.
Like the MPS, the Septic Stack is a space-saving alternative to the standard mineral-aggregate drainfield. The Septic Stack also consists of nine, eleven, or thirteen banded pipes constructed of four-inch, corrugated, high-density polyethylene tubing.
Over the years, the thousands of MPSs that have been installed in Florida have proved that this Alternative Drainfield System operates adequately by protecting public health and the water resources of Florida. Although there is some dispute between Petitioner and ADS as to the specifications of the MPS that Petitioner licensed ADS to sell for installation in Florida, the MPS that ADS manufactured and that was installed in Florida
is identical to the Septic Stack in terms of the perforated area punched into each length of pipe, an important feature in the proper performance of these Alternative Drainfield Systems. A small difference exists between the Septic Stack and the MPS in terms of the width of the straps holding the tubing in place during and after installation. Although the proper performance of these two Alternative Drainfield Systems requires that the pipes remain banded together, the small difference in the width of the banding straps is immaterial to their performance.
The Septic Stack is the functional equivalent of the MPS. Because the MPS has adequately protected public health and the water resources, which are the relevant statutory purposes, as stated in the Conclusions of Law, the proposed variance would achieve the purpose of the statute by other means than those means set forth in the rule provisions from which the variance is sought.
Consideration of hardship and fairness issues is complicated by the fact that, as discussed in the Conclusions of Law, the Septic Stack is not an innovative system, so it is not subject to innovative system testing under rule 64E-6.009(7) and 64E-6.009(7)(a)4. The following two paragraphs are necessarily conditional, assuming, for the sake of discussion, that DOH had properly determined that the Septic Stack requires a variance from the rule requiring innovative system testing. In this
conditional case, requiring ADS to provide empirical data from innovative system testing would not produce a substantial hardship or be unfair to ADS by affecting it in a manner significantly different from the way that these rule provisions affect similarly situated persons that are subject to the rule.
ADS has argued that the application of the rule would result in a substantial financial hardship. The record does not include an approximate cost of innovative system testing. If DOH had determined that the Septic Stack were not the functional equivalent of the MPS, the difference between these two Alternative Drainfield Systems would necessarily have been very slight, so any innovative element of the Septic Stack would not have required extensive or costly testing. Additionally, the record includes nothing about the net worth or revenues of ADS. There is thus no basis whatsoever for determining that innovative system testing itself would present a substantial financial hardship for ADS.
ADS claims that the time required for innovative system testing would present a substantial financial hardship. The record does not indicate how long such testing would take.
Again, if DOH had determined that the Septic Stack were not the functional equivalent of the MPS, the difference between these two Alternative Drainfield Systems would necessarily have been very slight, so any innovative element of the Septic Stack would
not have required lengthy testing. It is thus impossible to estimate lost sales resulting from innovative system testing, nor is it possible to determine whether the lost profits, if any, from these sales would present a substantial financial hardship to ADS, given the absence of any evidence of the net worth or revenues of ADS.
The record contains no indication of other hardships, such as technical or legal, resulting from requiring ADS to conduct innovative system testing. As explained in the Conclusions of Law, by proposing to grant ADS a variance from rule 64E-6.009(7) and (7)(a)4., DOH misapplies these two poorly worded rule provisions. But DOH's misapplication of these rule provisions does not create a statutorily recognized substantial legal hardship. The solution is not for DOH to misinterpret its rules and then grant variances due to the legal hardship arising from its misinterpretation; the solution is for DOH to acknowledge that the innovative system testing provisions of rule 64E-6.009(7) and (7)(a)4. do not apply to the Septic Stack because the Septic Stack is not an innovative system.
ADS has argued that application of the innovative system testing provisions of rule 64E-6.009(7) and
64E-6.009(7)(a)4. would be unfair. But, as to these two rule provisions, the record fails to identify any person similarly situated to ADS or, thus, any difference in the impact of the
rule on such a hypothetical person compared to the impact of the rule on ADS. The only other drainfield manufacturer identified in this case is Petitioner. The correct application of the relevant provisions of rule 64E-6.009(7) and (7)(a)4. required Petitioner to conduct innovative system testing and submit the empirical data to DOH because the MPS was an innovative system at the time--exactly what would be expected of ADS, if the Septic Stack were in fact an innovative system.
Likewise, the application of rule 64E-6.009(7)(d) to the Septic Stack would not result in a substantial hardship of any sort, but it would be unfair. As noted in the Preliminary Statement, this rule provision prohibits the use of an alternative drainfield with an area smaller than the area required for a mineral-aggregate drainfield. As approved by DOH, the MPS drainfield is smaller than the area of a mineral- aggregate drainfield. The Septic Stack is functionally equivalent to the MPS, so the literal application of this rule to ADS's Septic Stack, but not to Petitioner's MPS, affects ADS in a manner significantly different from the way it affects Petitioner.
Lastly, Petitioner has proved that its economic interests will suffer an injury in fact from the Variance Order. The proof of economic injury is straightforward. The addition of a competitor marketing a functionally equivalent Alternative
Drainfield System in Florida will reduce Petitioner's sales in Florida. From the evidence produced by ADS in terms of lost sales resulting from the delay that would have resulted from innovative system testing,9/ Petitioner's economic injuries would not be insubstantial if ADS markets the Septic Stack in Florida.
Petitioner has failed to prove any injury to any environmental interests, of which Petitioner has demonstrated none.
CONCLUSIONS OF LAW
In any case involving a disputed issue of material fact, DOAH has jurisdiction when an agency's decision concerning a variance request determines the substantial interests of a person. §§ 120.542(8), 120.569, and 120.57(1), Fla. Stat. As is evident in the Findings of Fact, this case presents disputed issues of material fact. The closer question--whether Petitioner's substantial interests are determined by the Variance Order--is addressed at the end of the Conclusions of Law.
Petitioner's notice argument is rejected as groundless.
Petitioner timely filed its Petition, so its ability to participate in this formal administrative hearing was unaffected by any deficiencies in the published notice of the Variance Order. Nothing in the record suggests that Petitioner was entitled to participate in the free-form agency proceeding that culminated in the issuance of the Variance Order, so Petitioner
was likewise unaffected by any deficiencies in the published notice of receipt of either of the petitions for variance.
In the typical administrative proceeding, ADS, as an applicant, would bear the burden of proving the material allegations by a preponderance of the evidence. Dep't of Transp.
v. J.W.C. Co., 396 So. 2d 778, 785-88 (Fla. 1st DCA 1981);
§ 120.57(1)(j). This burden attaches to an applicant, regardless of whether the proposed agency action is to grant or deny the application, because the formal administrative proceeding is de novo and not a review of proposed agency action. J.W.C. at
788-89. The present case raises the issue of whether, or the extent to which, these administrative law principles apply to a variance proceeding.
In framing the issues in terms of supporting competent substantial evidence and allocating the burden of proof to Petitioner, rather than ADS, the parties have been governed by section 120.542(8),10/ which provides:
An agency shall grant or deny a petition for variance or waiver within 90 days after receipt of the original petition, the last item of timely requested additional material, or the petitioner’s written request to finish processing the petition. A petition not granted or denied within 90 days after receipt of a completed petition is deemed approved. A copy of the order granting or denying the petition shall be filed with the committee and shall contain a statement of the relevant facts and reasons supporting the agency’s action. The agency shall provide
notice of the disposition of the petition to the Department of State, which shall publish the notice in the next available issue of the Florida Administrative Register. The notice shall contain the name of the petitioner, the date the petition was filed, the rule number and nature of the rule from which the waiver or variance is sought, a reference to the place and date of publication of the notice of the petition, the date of the order denying or approving the variance or waiver, the general basis for the agency decision, and an explanation of how a copy of the order can be obtained. The agency’s decision to grant or deny the petition shall be supported by competent substantial evidence and is subject to ss. 120.569 and 120.57. Any proceeding pursuant to ss. 120.569 and 120.57 in regard to a variance or waiver shall be limited to the agency action on the request for the variance or waiver, except that a proceeding in regard to a variance or waiver may be consolidated with any other proceeding authorized by this chapter. (emphasis added.)
The sentences preceding the highlighted sentence apply to the free-form agency proceeding leading up to the issuance of the Variance Order, which provides a point of entry for a formal administrative proceeding at DOAH. The sentence following the highlighted sentence applies to the formal administrative proceeding at DOAH. The transition between these proceedings occurs in the highlighted sentence: the "supported by competent substantial evidence" language applies to DOH's factfinding during the free-form agency proceeding, and the "subject to ss.
120.569 and 120.57" language applies to the formal administrative proceeding at DOAH.11/ Thus, in the present proceeding, ADS bears
the burden of proving by a preponderance of the evidence that it is entitled to the variance.
Section 120.542 imposes three requirements for a variance: 1) the applicant must be subject to the rule from which the variance is sought;12/ 2) the purpose of the statute underlying the rule will be achieved by other means; and 3) the application of the rule would create a substantial hardship or violate principles of fairness.13/ Section 120.542(2) explains that a substantial hardship is a "demonstrated economic, technological, legal, or other type of hardship to the person requesting the variance," and "'principles of fairness' are violated when the literal application of a rule affects a particular person in a manner significantly different from the way it affects other similarly situated persons who are subject to the rule."
The three rule provisions from which ADS seeks a variance require analysis of rules 64E-6.008 and 64E-6.009. Rule 64E-6.008 is entitled, "System Size Determinations."
Rule 64E-6.008 specifies the size requirements of various OSTDS components, including the minimum area of drainfield systems, which are specified at rule 64E-6.008(5) and are also subject to the criteria, including sizing criteria, set forth in
rule 64E-6.014. In general, rule 64E-6.008 applies to standard systems, including "standard subsurface drainfield systems."
Systems described in rule 64E-6.008 shall be referred to as Standard Systems or Standard Drainfield Systems.
Rule 64E-6.009 is entitled, "Alternative Systems." Alternative Systems, including Alternative Drainfield Systems, are described in rule 64E-6.009, which provides that Alternative Systems may be installed where Standard Systems are "not suitable" or Alternative Systems are "more feasible."
Rule 64E-6.009 identifies three types of Alternative Drainfield Systems. Rule 64E-6.009(3) provides the requirements for "mound systems," including mound drainfield systems. Rule 64E-6.009(5) provides the requirements for "drip irrigation systems" when used in place of mineral-aggregate drainfields. Rule 64E-6.009(6) provides the requirements for "tire chip aggregate" drainfield systems when used in place of the mineral- aggregate drainfields.
Finally,14/ rule 64E-6.009(7) and (8) provides:
Alternative system component and design approval – After innovative system testing is completed, requests for approval of system components and designs which are not specifically addressed in this chapter shall be submitted to the department’s Bureau of Onsite Sewage Programs.
Requests for alternative system component material and design approval shall include:
Detailed system design and construction plans by an engineer licensed in the State of Florida;
Certification of the performance capabilities of the product submitted by an engineer licensed in the State of Florida;
Research supporting the proposed system materials;
Empirical data showing results of innovative system testing in the State of Florida; and
A design, installation and maintenance manual showing how to design and install the system in accordance with this chapter for standard, filled, mounded, gravity-fed, dosed, bed and trench configurations.
In addition to those items listed in paragraph 64E-6.009(7)(a), F.A.C., manufacturers of drip effluent disposal system distribution lines, emitters, and components shall apply for and obtain approval from the Bureau of Onsite Sewage Programs for specific model numbers or part numbers prior to inclusion of the components on any site specific permit application. Manufacturer’s of drip effluent disposal system components shall provide design and installation manuals for engineering and construction guidance. Design manuals shall include tables that detail flow rates vs. pressure and pressure loss per length(s) of distribution pipe.
The detailed plans and information submitted with the approval request shall be reviewed by the department onsite sewage program to determine whether or not there is a reasonable certainty of the effectiveness and reliability of the proposed alternative system component. If the department is not satisfied that the information provided provides reasonable evidence of the effectiveness and reliability of the alternative system component and designs, the department shall deny the approval.
Department approval of any alternative system component does not guarantee or imply that any individual system installation will perform satisfactorily for a specific period of time. Upon department approval of the material and design, the manufacturer shall list the department approval date in the installation and design manual. Proposals to amend the approved installation and design manual shall be submitted to the bureau for approval. The date of amendment approval shall be included in the manual.
Except as provided for in Part IV of this chapter, alternative drainfield materials and designs shall not be approved which would result in a reduction in drainfield size using the mineral aggregate drainfield system as described in
64E-6.014, F.A.C., and the total surface area of soil at the bottom of the drainfield as the criteria for drainfield sizing comparisons. Alternative system component and design approvals shall not be granted for the following items:
Those which, in whole or in part, are used to achieve a more advanced level of treatment than the baseline treatment level specified in part IV of this chapter;
Aerobic treatment units;
Septic tank designs, filters, seals, and sealants;
Additives;
Header and drainfield pipe, including their layout; and
Water table separation and setback requirements.
Unless determined unnecessary or impractical by the Department at the time of component approval, effective January 1,
2010, all components shall be labeled with the name of the manufacturer and the model identification of the component. The design, installation and maintenance manual shall show the location of the label and shall include an illustration of a typical label.
The label shall be in a location where it will be visible or easily exposed at the time of system inspection. All identifying marks shall be inscribed or affixed at the point of manufacture.
Other alternative systems – systems such as low pressure distribution networks, small diameter gravity sewers, low pressure sewer systems, alternating absorption fields, and sand filters designed and submitted by an engineer who is licensed in the State of Florida, meeting the general requirements of this chapter, shall be approved by the DOH county health department where evidence exists that use of such systems will not create sanitary nuisance conditions, health hazards or pollute receiving waters. Use of an alternative system may require the establishment of procedures for routine maintenance, operational surveillance, and environmental monitoring to assure the system continues to function properly.
Rule 64E-6.009(8) applies to Alternative Systems, including Alternative Drainfield Systems, that are not identified in the preceding subsections of the rule.
Rule 64E-6.009(7) provides the means by which to obtain DOH's approval for the use of an Alternative System whose "components and designs" have not already been approved elsewhere in chapter 64E-6. Obviously, the components and designs of Standard Systems are covered by rule 64E-6.008, and most, if not all, of the components and designs of three Alternative
Drainfield Systems--mound systems, drip irrigation systems, and tire chip aggregate systems--are covered in the subsections of rule 64E-6.009 cited immediately above.
For an Alternative System whose components and designs are not addressed elsewhere in chapter 64E-6, rule 64-6.009(7) requires the submittal to DOH15/ of certain information to obtain approval for the use of this system. This information includes detailed design and construction plans from a licensed engineer, certification from a licensed engineer of the performance capabilities of the proposed Alternative System, research supporting the materials of the proposed Alternative System, and a design and installation manual.
For a proposed Alternative System that is also an "innovative system," rule 64E-6.009(7) and (7)(a)4. requires "innovative system testing." According to rule 64E-6.002(30), an "innovative system" is defined in section 381.0065(2). Section 381.0065(2)(h) defines an "innovative system" as an OSTDS "that, in whole or in part, employs materials, devices, or techniques that are novel or unique and that have not been successfully field-tested under sound scientific and engineering principles under climatic and soil conditions found in this state."
As DOH contends, the Septic Stack is not an "innovative system." It is functionally equivalent to the MPS, which, after extensive innovative system testing 15 years ago and over 10,000
installations in the field over a ten-year period without reported problems, is no longer the innovative system that it was when Petitioner first proposed its use in Florida. Although the phrasing of the references to innovative system testing in rule 64E-6.009(7) and (7)(a)4. could be clearer, essentially, these provisions apply only to Alternative Systems that are also innovative systems; it makes no sense to require innovative system testing--or the data from such testing--of Alternative Systems that are not innovative systems.
The Septic Stack is thus not subject to these rule provisions, so ADS has failed the first requirement for a variance--being subject to these two rule provisions from which a variance is sought. Additionally, for the reasons stated in the Findings of Fact, a variance from these two rule provisions is unnecessary to prevent a substantial hardship or unfairness.
However, the Septic Stack is subject to the third rule provision: rule 64E-6.009(7)(d). As noted above, this rule prohibits the use of a drainfield, including the Septic Stack, even if it is not an innovative system, with an area smaller than the area of a mineral-aggregate drainfield.16/
It would be unfair not to grant a variance from this rule provision. The literal application of this rule provision would affect ADS in a manner significantly different from the way
it affects Petitioner--and for no good reason given the functional equivalence of the two Alternative Drainfield Systems.
The statute implemented by rule 64E-6.009 is section 381.0065. Section 381.0065(1)(b) provides: "It is . . . the intent of the Legislature that the installation and use of onsite sewage treatment and disposal systems not adversely affect the public health or significantly degrade the groundwater or surface water." The purpose of section 381.0065 is met, even after the issuance of a variance from rule 64E-6.009(7)(d), by the functional equivalence of the Septic Stack to the MPS and the successful record of the MPS over a period of several years.
As noted above, DOAH jurisdiction requires that the Variance Order determines Petitioner's substantial interests. In general, a showing of substantial interests requires an
injury-in-fact of sufficient immediacy to entitle the party to a formal administrative hearing and of a type or nature that the proceeding is designed to protect. Agrico Chem. Co. v. Dep't of Envtl. Reg., 406 So. 2d 478 (Fla. 2d DCA 1981).17/
Plainly, Petitioner has demonstrated a high degree of potential injury in fact from the Variance Order. The Septic Stack is indistinguishable from the MPS, which, as an innovative product, has controlled the Florida market for drainfield systems of this type of construction. The entry of the Septic Stack into the Florida market will result in economic injury to Petitioner
proportionate to the lost sales that ADS proved that it would suffer by any delay in bringing the Septic Stack to the Florida market.
The closer question is whether the nature of Petitioner's economic injury is within the protection of section 381.0065, which is the sole permitting statute at issue in this case. In claiming that its substantial interests are determined by the Variance Order, Petitioner relies in part on the limitation in section 381.0065(3)(e) on the number of innovative systems. The Variance Order assumes that ADS is subject to the two provisions of rule 64E-6.009(7) applicable to innovative systems, and the parties have shared this assumption from the commencement of the formal administrative proceeding through the filing of proposed recommended orders.
Although it is now clear the Septic Stack is not subject to these two rule provisions, the jurisdictional determination of substantial interests is prospective, not retrospective. Peace River/Manasota Regional Water Supply Authority v. IMC Phosphates Co., 18 So. 3d 1079, 1082-84 (Fla. 2d
DCA 2009) (whether petitioner's substantial interests "could be affected by the agency's action"); Palm Beach Cnty. Envtl. Coal.
v. Dep't of Envtl. Protection, 14 So. 3d 1076, 1078 (Fla. 4th DCA 2009) (petitioners' substantial interests "reasonably could be affected by the proposed activity"). A party's substantial
interests may not "disappear" based on the ultimate outcome of the proceeding. Hamilton Cnty. Bd. of Cnty. Comm'r v. Dep't of Envtl. Reg., 587 So. 2d 1378, 1383 (Fla. 1st DCA 1991).
Thus, the Variance Order determines Petitioner's substantial interests. At the commencement of the case, Petitioner's substantial interests reasonably could have been determined by the Variance Order because the variance appeared to permit the installation of additional innovative systems, Petitioner sells equivalent innovative systems, and section 381.0065(3)(e) limits the number of innovative systems. See
Shands Jacksonville Med. Ctr., Inc. v. State, 123 So. 3d 86 (Fla. 1st DCA 2013). Petitioner's substantial interests do not "disappear" because the final order ultimately concludes that the Septic Stack was never subject to the provisions of rule
64E-6.009(7) governing innovative systems.
Interestingly, Petitioner relies on Florida Medical
Association v. Department of Professional Regulation, 426 So. 2d
1112 (Fla. 1st DCA 1983), to establish substantial interests jurisdiction. Florida Medical Association involved a rule
challenge. The court determined that the petitioner had demonstrated that it was substantially affected by showing economic injury and was not required to show that its injury was within the zone of interest of any statute underlying the challenged rule. The court distinguished Agrico on the ground
that, in challenging a rule, the petitioner necessarily claimed that the agency had committed an unlawful exercise of authority. Id. at 1114-15.
At first glance, Petitioner's reliance on a rule challenge case seems to be based on an argument that prove too much. Petitioner essentially argues that an unlawfully issued variance--and, by extension, an unlawfully issued permit--demands the same result as an unlawful exercise of authority in a rule case: the challenger in each such case is relieved of the requirement of showing that its injury is within the zone of interest of the relevant statutes. Taken to its logical extreme, this argument would eliminate the second prong of Agrico in
variance and permitting proceedings.
On the facts of this case, though, Petitioner is correct. DOH's error in proposing to grant the variance to the two provisions of rule 64E-6.009(7) concerning innovative systems more closely resembles an agency's unlawful action in connection with a rule than a permit. More importantly, the effect of the proposed variance would not be limited to a single project, such as a water treatment plant or a dock, but would relieve ADS and septic tank contractors from the burden of complying with the subject rule provisions indefinitely, potentially in tens of thousands of installations over the next several years. In this
manner, the variance process in this case more closely resembles rulemaking than, say, permitting.
For the variance from the rule provision specifying the minimum area of drainfields, the variance operates as the repeal of the rule provision and the adoption of a new rule assigning the Septic Tank three square feet of area for each linear foot of pipe. For the variance from the rule provisions addressing innovative systems, the variance would have operated as an amendment, sub silentio, of the two rule provisions mentioning innovative systems to clarify that these provisions are applicable only to Alternative Systems that are innovative systems and then a determination that the amended rule is not applicable to the Septic Stack because it is not an innovative system.
Such ambitious exercises in issuing variances are, at the very least,18/ amenable to jurisdictional analysis of substantial interests that is informed by cases involving rule challenges. By this reasoning, economic injuries acquire the same prominence in this determination of substantial interests as they have in the determination of a substantially affected person in a rule challenge case such as Florida Medical Association.19/
Petitioner's argument concerning injury to its environmental interests is unavailing.20/
It is
RECOMMENDED that Department of Health enter a final order determining that Advanced Drainage Systems, Inc. is entitled to a variance from rule 64E-6.009(7)(d) in accordance with the formula set forth in the Variance Order, but not from rules 64E-6.009(7) and (7)(a)4. as to innovative systems.21/
DONE AND ENTERED this 19th day of December, 2014, in Tallahassee, Leon County, Florida.
S
ROBERT E. MEALE
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 19th day of December, 2014.
ENDNOTES
1/ ADS no longer seeks a variance from this rule, so this issue is not addressed in this recommended order.
2/ As the court noted in Capeletti Brothers v. State, 362 So. 2d 346, 348 (Fla. 1st DCA 1978):
“Free-form” proceedings are nothing more than the necessary or convenient procedures,
unknown to [chapter 120, Florida Statutes], by which an agency transacts its day-to-day business. [Citation omitted.] Without summary letters, telephone calls, and other conventional communications, the wheels of government would surely grind to a halt.
3/ There is no difference between a "product" and a "system." To conform to the nomenclature of the rules, this recommended order will use "system."
4/ The limited warranty promises a replacement drainfield at no cost if the Septic Stack failed within two years of installation due to defects in materials.
5/ Consistent with the evidence received at the hearing and ADS's characterization of the issue in its proposed recommended order, this recommended order construes this allegation more broadly as economic injury.
6/ Although the Variance Order does not determine that the Septic Stack is not an innovative system, DOH reasserted in its proposed recommended order that the Septic Stack is not an innovative system. As discussed below, DOH is correct in this assertion.
Unfortunately, DOH did not analyze the consequences of determining that the Septic Stack is not an innovative system, but instead continued to argue that ADS should be entitled to a variance from the two rule provisions that apply exclusively to innovative systems.
7/ A trial court is not bound by the parties' stipulations of law that misstate the law. See, e.g., Grassie v. Masterson, 221 Kan. 540, 550, 561 P.2d 796, 804 (1977); In re Finley Estate, 430
Mich. 590, 595-96, 424 N.W. 2d 272, 275 (1988). This principle applies with particular force to administrative proceedings in which the Administrative Law Judge, as a creature of statute, lacks the authority to deviate from statutory directives, even at the invitation of all of the parties.
Additionally, footnote 6 in Petitioner's proposed recommended order suggests that Petitioner may not agree that it bears the burden of proof or that the Administrative Law Judge is to determine the facts by a standard other than a preponderance of the evidence.
8/ As reflected in the transcript, the Administrative Law Judge left the record open for various matters in response to requests
or objections of Petitioner and ADS, but neither party elected to produce additional evidence following the close of the hearing.
9/ ADS projects lost sales of three million linear feet annually.
10/ It is open to question as to whether the parties' stipulation was also informed by section 120.542(2), which provides in part:
Variances and waivers shall be granted when the person subject to the rule demonstrates that the purpose of the underlying statute will be or has been achieved by other means by the person and when application of a rule would create a substantial hardship or would violate principles of fairness.
Section 120.542(2) explicitly requires ADS to show that the purpose of the underlying statute has been achieved by other means, but, due to the placement of the second "when," does not explicitly place upon ADS the burden of proving a hardship or unfairness.
11/ "Competent substantial evidence" is evidence that "a reasonable mind would accept as adequate to support a conclusion." Verizon Florida, Inc. v. Jaber, 889 So. 2d 712, 714
n.1 (Fla. 2004). This legal standard may provide the evidentiary standard for agency factfinding. Dusseau v. Miami-Dade Cnty. Bd. of Cnty. Comm'r, 794 So. 2d 1270, 1274 (Fla. 2001) (citing Irvine v. Duval Cnty. Planning Comm'n, 495 So. 2d 167 (Fla. 1986)). See also State v. Wiggins, So. 3d , 2014 Fla. App. LEXIS 13751 (Fla. 1st DCA 2014).
This legal standard may also provide the evidentiary standard for judicial review of certain agency decisions following factfinding, as is apparent in the cases cited below. Because DOAH is not the agency granting a variance, "competent substantial evidence" in section 120.542(8) is not a directive for the Administrative Law Judge to make findings of fact in accordance with this evidentiary standard.
On the other hand, in accordance with the parties' apparent stipulation and ADS's argument in its proposed recommended order, the question in this case is whether the Administrative Law Judge's findings of fact must conform to the standard of "competent substantial evidence" for judicial review. This approach would raise serious problems.
The statutory language, "subject to ss. 120.569 and 120.57," lacks much, if any, meaning if the Administrative Law Judge is required to make findings in accordance with the review standard of competent substantial evidence. In such a case, as the parties argue here, the factfinding will not conform to two of the more basic principles of formal administrative litigation under sections 120.569 and 120.57: the de novo hearing and the allocation of the burden of proof to the party asserting the affirmative of the issue. ADS's reliance on Florida Board of Medicine v. Florida Academy of Cosmetic Surgery, 808 So. 2d 243, 257-58 (Fla. 1st DCA 2002), is unpersuasive. As ADS concedes, this case was legislatively overruled, as acknowledged in Department of Health v. Merritt, 919 So. 2d 561, 564 (Fla. 1st DCA 2006). Without regard to the subsequent legislation, the court in Cosmetic Surgery transformed a criterion for invalidating a rule into the standard of proof for a rule challenge case. Here, ADS invites the Administrative Law Judge to transform a standard of proof for DOH's free-form proceeding into the standard of proof in this case.
Another problem in limiting factfinding to the review standard of competent substantial evidence is that the Administrative Law Judge would be limited to an examination of the evidence supporting the Variance Order, but not any evidence opposing the Variance Order. If the Administrative Law Judge were to find any competent substantial evidence supporting the agency's determination, the inquiry would end, and he would have to sustain the agency's determination without any examination of opposing evidence or weighing (or reweighing) of conflicting evidence. Fla. Power & Light Co. v. City of Dania, 761 So. 2d 1089, 1093-94 (Fla. 2000); Dusseau, supra at 1275; Miami Dade Cnty. v. Torbert, 69 So. 3d 970, 974 (Fla. 3d DCA 2011); Town of Manalapan v. Gyongyosi, 828 So. 2d 1029, 1033 (Fla. 4th DCA 2002). In view of the limitations of the typical free-form agency proceeding, in which evidence may not be under oath, witnesses may not be examined or cross-examined, and the formal participation of nonagency parties may be nonexistent, such severe limitations on the robustness of the formal administrative proceeding at DOAH would raise due process issues.
In Wiggins, supra, an agency hearing officer issued a final order affirming the suspension of a driver license based on the testimony of a law enforcement officer. The driver filed a petition for certiorari in circuit court. The circuit judge examined the evidence on which the hearing officer relied, which included a law enforcement officer's testimony and a video recording of the entire incident taken by a camera mounted in the
officer's vehicle. Finding that the video contradicted the testimony on which the hearing officer had relied, the circuit court, conceding that the hearing officer's order was supported by some evidence, cited the objective evidence of the video and determined that the hearing officer had erred as a matter of law. The circuit court overturned the administrative suspension of the driver license.
Quashing and remanding the circuit judge's order, a split panel of the First District noted that the circuit court's role was limited to assessing the evidence supporting the hearing officer and was prohibited from assessing contrary evidence, such as the video recording. Wiggins cites two policy reasons supporting this restriction on circuit court review. First, "litigants get one opportunity to make an evidentiary record and to persuade the fact-finder to one of their competing views of the evidence; they cannot appeal to a circuit court and obtain such detailed review again." Second, the circuit court owes deference to the hearing officer, who heard the live testimony, evaluated the video recording in conjunction with the officer's conflicting testimony, and possesses superior experience, as an agency hearing officer, over driver suspension proceedings.
With the exception of relative experience, the factors cited in Wiggins militate in favor of imposing on ADS the burden of proving by a preponderance of the evidence that it is entitled to the proposed variance.
12/ In its proposed recommended order, DOH cites section 120.542(5), which requires that a party seeking to file a variance petition be "subject to regulation by an agency rule." In contrast to this broad language, section 120.542(2), which provides the criteria for obtaining a variance, requires, among other things, that the variance applicant be "subject to the rule." The rule is, of course, the rule from which the variance is sought.
13/ Section 120.542(1) imposes one prohibition: an agency may not grant a variance from a statute. As noted above, Petitioner has argued that DOH is granting a variance from section 381.0065(3)(e), which states that an applicant seeking approval of an innovative system must comply with all applicable rules.
This statutory provision imposes no requirements on the process by which DOH approves innovative systems; the provision merely reinforces the obvious fact that an applicant must comply with DOH's rules, which would be enforceable without
section 381.0065(3)(e). For this reason, Petitioner's argument is rejected.
14/ There are two more subsections to rule 64E-6.009, but they are irrelevant to this case.
15/ The rule assigns certain tasks to the Bureau of Onsite Sewage Programs, but this recommended order treats the Bureau as DOH for the sake of simplicity.
16/ As cited above, rule 64E-6.009(7)(d) prohibits a drainfield area smaller than the drainfield area of a mineral-aggregate drainfield, "except as provided for in Part IV of this chapter." Chapter 64E-6, part IV, comprises rules 64E-6.025, -6.026,
-6.027, -6.028, -6.029 and -6.0295. This part generally applies to Alternative Systems that are designed to meet quantifiable levels of biochemical oxygen demand, total suspended solids, total phosphorus, total nitrogen, and fecal coliform. These provisions are irrelevant to the present case because the Septic Stack is not a performance-based Alternative System within the scope of part IV.
17/ In Agrico, supra, the agency had issued proposed environmental permits that competitors of the applicant sought to challenge based on claims of economic injuries from the permits. The court held that the third parties had shown a high degree of potential injury, but had been unable to show that the nature of their injury was within the protection of the permitting statutes contained in chapter 403. Id. at 482.
18/ Although not raised by Petitioner, a related issue is to what extent, on these facts, the Variance Order represents an attempt by DOH to substitute the variance process for rulemaking.
19/ Under the facts of this case, a mechanical application of the Agrico second prong would represent, not merely reconfirmation of the teaching of Agrico, but an extension of the teaching of Agrico to facts not contemplated by the Agrico court. The inquiry is to determine whether Petitioner's substantial interests are determined by the Variance Order. To apply the teaching from a case involving a rule challenge under section
120.56 to a case involving an adjudication of disputed facts under section 120.569 is merely to repeat the practice of the Agrico court, which cited only one case--a case involving a rule challenge--Department of Offender Rehabilitation v. Jerry, 353 So. 2d 1230 (Fla. 1st DCA 1978).
20/ The purpose of the citation of Jerry, supra, in Agrico was to support the court's conclusion that the environmental interests of the permit challengers were not "substantially affected" by the permits. Whether presented by a chemical company in Agrico or a mining company in American Independence Mines & Minerals Co. v. U.S. Department of Agriculture, 494 Fed. Appx. 724, 726-27 (9th Cir. 2012), Petitioner, as a manufacturer of septic tank drainfields, is not going to find any case law to support its claim of environmental injury, even if intertwined with economic injury.
21/ The parties agreed that the question of whether DOH should approve the Septic Stack would be driven by the disposition of ADS's request for a variance. Given the determinations that two of the rule provisions do not apply to the Septic Stack and ADS is entitled to a variance from the third provision, DOH should approve the Septic Stack, as though the variances from the three rule provisions were granted.
COPIES FURNISHED:
David C. Ashburn, Esquire Greenberg Traurig, P.A.
101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32301 (eServed)
Amanda G. Bush, Esquire Department of Health
Office of the General Counsel 4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1703 (eServed)
Daniel Elden Nordby, Esquire Shutts & Bowen LLP
Suite 804
215 South Monroe Street Tallahassee, Florida 32301 (eServed)
Joseph R. Miller, Esquire Vorys, Sater, Seymour
and Pease, LLP
52 East Gay Street Columbus, Ohio 43215
Mitchell A. Tobias, Esquire Vorys, Sater, Seymour
and Pease, LLP
52 East Gay Street Columbus, Ohio 43215
Jaime Briggs, Agency Clerk Department of Health
4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1703 (eServed)
Jennifer A. Tschetter, General Counsel Department of Health
4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1703 (eServed)
John H. Armstrong, M.D., F.A.C.S. State Surgeon General
Department of Health
4052 Bald Cypress Way, Bin A00 Tallahassee, Florida 32399-1703 (eServed)
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 28, 2015 | Agency Final Order | |
| Dec. 19, 2014 | Recommended Order | No variance for rules that do not apply to variance applicant. Variance on fairness ground for rule setting minimum area of drainfields. BOP on variance applicant to prove entitlement by preponderance. Economic injury OK for standing. |
