Findings Of Fact Petitioner is a regulatory agency of the State of Florida charged with the responsibility of investigating and prosecuting complaints against real estate professionals, including licensed real estate salesmen. At all times pertinent to this case, Respondent, Gerard Latulippe, (Latulippe) was licensed by Petitioner as a real estate broker in the State of Florida in accordance with Chapter 475, Florida Statutes. At all times pertinent to this case, Respondent, Hanover International Realty, Inc., (Hanover) was a corporation registered as a real estate broker in the State of Florida in accordance with Chapter 475, Florida Statutes, with Mr. Latulippe as the qualifying broker. On November 17, 1987, Mr. Latulippe obtained a sales contract entered into by First United Realty, Inc., as purchaser, and the Estate of Louise Pio Meritai (Meritai Estate), as seller, at a sales price of $34,000. The contract provided that a deposit of $1,000 was to be placed with Hanover. The transaction did not close because the purchaser was unable to obtain financing. Neither Mr. Latulippe nor Hanover received the deposit required by the contract. On May 11, 1988, Georgia A. Kraff, on behalf of the Meritai Estate, made demands upon Mr. Latulippe and Hanover for the delivery of the deposit money. On June 26, 1988, Mr. Latulippe, proceeding as if there were a deposit, prepared and delivered to the Meritai Estate a release of deposit receipt agreement which provided that $500 would be delivered to the Meritai Estate, $250 would be returned to Florida First Realty as the listing broker, and $250 would be retained by Hanover. On June 27, 1988, Mr. Latulippe and Hanover stated in a letter to the attorney for the Meritai Estate the following: We have in our possession a check for $1,000.00 for the Pio Meritai Estate. $500.00 for the Estate, $250.00 for Florida First Realty and $250.00 for Hanover International Realty. We are prepared to release these funds as soon as we are authorized by the parties. Enclosed please find also a release of deposit form. ... On August 10, 1988, the Meritai Estate signed the release of deposit form which was returned to Hanover. Florida First Real Estate, as listing broker, did not execute the release agreement, but there was no evidence that it was called upon to do so. As of August 10, 1988, neither Mr. Latulippe nor Hanover had advised the Meritai Estate that no deposit had been received, nor had these Respondents notified the Florida Real Estate Commission or Petitioner that it had received demands on a deposit that had never been received. No monies were paid by Respondents to the Meritai Estate or to Florida First Real Estate. On February 9, 1988, Respondent Latulippe obtained two sales contracts for the sale of two condominium units. On each contract, the purchase price was $34,600 and for each contract a $1,000 deposit was to be made with Hanover's escrow account. Elwyn Jacobs, trustee, was the purchaser on both contracts and Carl and Dominica Palmisciono were the sellers on both contracts. The purchaser subsequently defaulted on both contracts and neither of these contracts closed. The purchaser did not make the deposits into Hanover's escrow account as required by the contracts. On June 17, 1988, the Palmiscionos made demands upon the Respondents for delivery of the deposit money. On June 27, 1988, Mr. Latulippe prepared and delivered a release of deposit receipt agreement which provided that $1,000 was to be delivered to the Palmiscionos, $500 was to be delivered to International Partners Realty, Inc., as the listing broker, and $500 was to be retained by Respondents. On June 28, 1988, the sellers signed the release of deposit form and returned it to the Respondents. As of June 28, 1988, neither Mr. Latulippe nor Hanover had advised the Palmiscionos that neither deposit had been received, nor had these Respondents notified the Florida Real Estate Commission or Petitioner that it had received demands on deposits that had never been received. No monies were paid by these Respondents to the Palmiscionos or to International Partners Realty, Inc. On February 23, 1988, Mr. Latulippe obtained a sales contract for the sale of a condominium unit for the sum of $47,200. Carol A. Neal was the owner and seller and Elwyn Jacobs, trustee, was the purchaser on this contract. The contract required the purchaser to deposit the sum of $1,000 in Hanover's escrow account. This contract did not close as a result of the purchaser's default. The purchaser did not make the deposit into Hanover's escrow account as required by the contract. On July 8, 1988, the seller made demands upon the Respondents for the delivery of the deposit money and furnished Respondents with a release of deposit agreement. This agreement was never fully executed and no funds were disbursed to the seller. On July 26, 1988, and on August 10, 1988, additional written demands were made on the Respondents on behalf of Carol A. Neal for the disbursement of the escrowed funds. As of August 10, 1988, neither Mr. Latulippe nor Hanover had advised Carol A. Neal that no deposit had been received, nor had these Respondents notified the Florida Real Estate Commission or Petitioner that it had received demands on a deposit that had never been received. No monies were paid by Respondents to the seller or to the listing broker. On May 31, 1988, Mr. Latulippe received in trust a deposit in the amount of $1,000 from Paul Boulware and Lyn Snody in a transaction involving of a lease of certain real property with an option to purchase the real property for the sum of $200,000. Mr. Latulippe was the owner of the subject real property and dealt with Mr. Boulware and Ms. Snody at all times in his capacity as the owner of the property as opposed to his capacity as a real estate broker. This transaction did not close and Mr. Latulippe refused to return the deposit he had received, despite the demands from Ms. Snody for him to do so. Mr. Latulippe believed that the $1,000 deposit was his because he believed that Ms. Snody and Mr. Boulware had defaulted under the terms of their contract. Ms. Snody tried to locate Mr. Latulippe or to contact him by telephone, but she was unable to do so. There was a genuine dispute between Mr. Latulippe and Ms. Snody and Mr. Boulware as to the entitlement of the $1,000 deposit. Mr. Latulippe did not notify the Florida Real Estate Commission or Petitioner that it had received demands on this $1,000 deposit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Professional Regulation, Florida Real Estate Commission, enter a final order which: Finds that Respondents Latulippe and Hanover violated the provisions of Section 475.25(1)(b), Florida Statutes, during the course of three separate transactions, to-wit: during the course of the Meritai Estate transaction, during the course of the Palmisciono transaction, and during the course of the Neal transaction. Suspends all licenses issued by Petitioner to Mr. Latulippe for a period of one year. Imposes an administrative fine in the amount of $3,000 for which Mr. Latulippe and Hanover will be jointly and severally liable. DONE and ORDERED this 19th day of March, 1990, in Tallahassee, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1990. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 89-5418 The proposed findings of fact submitted by Petitioner are adopted in material part by the Recommended Order except as follows: The term "conflicting demands" as used in Paragraphs 7, 11, and 15 of the proposed recommended order is not used in the Recommended Order because the escrowed funds never came into the hands of the Respondents Latulippe and Hanover. The proposed finding in paragraph 20 of the Proposed recommended order that the Respondents misappropriated the $1,000 deposit in the transaction between Mr. Latulippe, as owner and seller, and Ms. Snody and Mr. Boulware as lessee and purchaser, is rejected as being contrary to the findings made and to the conclusions reached. COPIES FURNISHED: Steven W. Johnson, Esquire Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 William S. Isenberg, Esquire The 110 Tower, Suite 1200 110 S.E. 6th Street Fort Lauderdale, Florida 33301 Kenneth E. Easley, General Counsel Department of Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-0792 Darlene Keller, Division Director Department of Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Gerald J. Latulippe Hanover International Realty, Inc., and Rent World, Inc. 1808 N.W. 115th Way Coral Springs, Florida 33071
Findings Of Fact Background Respondents, John F. and Chere Kuller, were minority partners in a limited partnership which developed and constructed a seventeen unit condominium project known as Bahia East Condominium (project).2 Thee precise location of the project was not disclosed, but it is in the Fort Walton Beach area. Respondents, as developers, are subject to the regulatory requirements of petitioner, Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes (Division). The project was completed in 1979, and its declaration was filed on September 28, 1979. Units immediately went on sale. Financing for these units we" arranged with a Pensacola lending institution, and based upon that institution's commitment, contracts for the sale of all seventeen units were executed by prospective buyers. When the institution experienced financial problems and could not honor its commitment, none of the buyers purchased units. Because of this, the first sale did not occur until October 4, 1980. A developer is required to adhere to a number of Division requirements, including the payment of monthly assess meets on developer-owned units, funding a repair reserve, and furnishing annual financial statements to all unit owners. This proceeding stems from a complaint filed by certain unit owners after the developers relinquished control of the project to the homeowners' association on May 11, 1984. Prior to that time, respondents controlled the board of directors of said association, and were responsible for the keeping of its books and records. Count I - Monthly Assessments As a general rule, a developer is not liable for the payment of monthly assessments on all unsold units until the first calendar date of the fourth month following the sale of the first unit. This ninety day grace period is commonly referred to as the election period. However, the developer may be excused from future payments if the developer guarantees to each purchaser that the monthly assessment will not increase, for a certain period of time, and obligates himself during this period of time to pay all common expenses incurred above the amount of assessments received from unit owners. In the case at bar, there was no written or oral guarantee by respondents to freeze the monthly assessments. This was confirmed through testimony of a unit owner, and evidenced by a monthly assessment increase that took effect in March, 1984, or prior to the turnover date. Between October, 1980 and March, 1984, the cost of the monthly assessment varied with the size of the unit, and ranged from $27.50 for the smallest unit, to $55.00 for a two bedroom, one bath unit, to $82.50 for the largest unit. Since no guarantee was made, respondents were obligated to begin paying assessments on their unsold units in February, 1981. However, they failed to do so. Instead, they calculated their other expenses in maintaining the project, and credited the amount of monthly assessments owed against these other expenses. Since other expenses always exceeded the amount of assessments owed, no funds were ever specifically earmarked into the monthly assessment account. Had such assessments been paid from February, 1981 through May 11, 1984, which is the turnover date, respondents' obligation would have been $15,948.64. This amount was derived from records given by respondents to the association at turnover and was not credibly contradicted. Count II - Reserves The complaint charges that respondents "failed to submit reserves annually nor fund reserves as required." According to Division requirements, a developer is required to establish and fund a reserve to cover future repairs from the date of declaration until the end of the election period. These funds are then turned over to the association. Beginning after the election period, a developer is required to establish and fund a reserve account in an amount prescribed by the project's declaration. In this case, the project's recorded declaration provided that the reserve had to equal 10% of the total annual monthly assessments paid by unit owners. Therefore, respondents were required to establish a reserve no later than February, 1981, and to fund it by setting aside 10% of the total monthly assessments. Such an account was timely established by respon- dents at a Pensacola bank in January, 1981 in the amount of $480. This amount was spent within three or four months on repairs to an air-conditioner generator and the purchase of reserved parking signs. No additional funds were placed in the reserve account after January, 1981. Each year a projected annual budget was prepared by the developers which included an amount for the reserve, but no funds were ever actually set aside for that purpose. Although this requirement can be waived by vote of the association, respondents conceded that the funding requirement was never waived. Respondents justified their course of action on the theory the association account into which the assessments were placed was running a deficit, and the developers had already guaranteed to cover all expenses. However, this procedure is not sanctioned by statute or rule. According to uncontradicted testimony, had appropriate reserves been funded as required, respondents would have funded $4,770.56 from February, 1981 until the turnover. Count III - Annual Financial Statements The final count involves an allegation that respondents "failed to furnish unit owners with an annual financial statement for the years 1980, 1981, 1982 and 1983." According to Division requirements, all non-developer unit owners must be furnished a copy of the project's "annual financial statement" each year. This document must be prepared and distributed by mail or personal delivery. Respondents claimed that this was done. However, petitioner presented the testimony of two unit owners for the purpose of showing that such statements were not distributed as required. One unit owner, William C. Naftel, received the 1982 statement, but could not recall one way or the other whether he received statements in the years 1981, 1983 and 1984. A second unit owner, Max C. Bolton, Jr., testified he "may have" received such a statement in 1982, but did not receive one for the years 1980, 1981 and 1983. Mitigation This project was respondents' first and only development venture in Florida. Respondents' lack of compliance with Division requirements did not appear to the undersigned to be intentional. Rather, it stemmed from a combination of poor outside advice and a failure on their part to make diligent inquiry as to what precise obligations the statutes and Division rules imposed upon them from an accounting and legal standpoint. At hearing, respondents claimed they have lost a considerable amount of money on the project, which amount far outweighs any claims advanced by the agency.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondents be found guilty of violating Subsections 718.115(2), 718.112(2)(k); and 718.111(13), Florida Statutes (1985), and that a $2,500 civil penalty be imposed; to be paid within thirty days from date of final order. DONE and ORDERED this 3rd day of June, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of June, 1986.
Findings Of Fact Respondent Shirley Holland was registered with Petitioner as a real estate salesman in January, 1976, associated with Vern Duncklee Real Estate and Insurance, Inc., Naples, Florida. He is presently registered as a real estate broker. (Stipulation) On January 5, 1976, W. H. Ragan gave the Duncklee firm a listing to sell real property consisting of approximately one and one-quarter acres located in Collier County, Florida, for a selling price of $7,500. Respondent was the listing salesman. (Testimony of Respondent, Ragan, Duncklee, Petitioner's Exhibit 6). Respondent also was a builder who operated as Holland Investment Company. It was his practice to purchase various properties, remodel existing structures on the same, and thereafter sell them at a profit. There was a two- room shed located on the Ragan property that had no inside finishing work, electricity, or septic tank. Respondent decided to take an option on the property in order to remodel it by adding a room and to place it in a habitable condition. He broached the subject to Ragan on January 6, 1976, and Ragan told him on January 7, that he was agreeable to such a contract. On January 8, Respondent and Ragan and his wife entered into a Sales Contract and Option to Buy for $7,500. The contract provided that closing would take place within twelve months and that the seller would give possession of the property to the purchaser on January 8, 1976. This was pursuant to an accompanying rental agreement dated January 8, 1976, between the parties for a period of twelve months which provided that Respondent could exercise his option at any time within the stated twelve-month period whereby all rents paid would be applied toward the down payment on the property of $1,900 which was to be made at closing of the sale. The rental agreement further provided that if Respondent did not exercise his option within the required time, any improvements made by him on the property during that period would be considered liquidated damages of the owner. Pursuant to these agreements, Respondent made a payment of $100 at the time they were executed, which represented an initial deposit on the contracts and as rent for first month of the term. The Option Agreement also gave Respondent authority to remodel the building on the property and it further reflected that Respondent was a registered real estate salesman and would be selling the property for profit. (Testimony of Respondent, Duncklee, Petitioner's Exhibits 5, 7) On January 5, 1976, Respondent showed Harold and Ruby Stacy several houses in the area that were for sale. On January 9, Respondent went by the Stacy residence to see if they were interested in any of the houses he had shown them. They were not interested in those houses and Respondent told them of property that he had recently acquired which was the Ragan property. He showed it to Mr. Stacy that night and the next day Mrs. Stacy went with him to look at the premises. During the course of their conversations, Respondent offered to rent the property to them for $100 for the period January 10 to February 1, 1976. It was his intention to rent it to them for $125 per month commencing in February on the condition that they clean and fix up the property. They also discussed the possibility of purchase at a later date. Respondent told them that he would sell to them for $13,000 if Harold Stacy would do the remodeling work on the shed with Respondent supplying the materials. Respondent quoted a possible sales price of $14,500 if he was obliged to provide both labor and materials for renovating the shed and providing for utility services. Respondent and the Stacys entered into a rental agreement on that day for the initial period of some three weeks and Ruby Stacy gave him a check dated January 10 for $100 with a notation thereon that it was a deposit on land. Respondent explained to Mrs. Stacy that he was merely renting the property at that time and added the word "rent" at the bottom of the check. (Testimony of Respondent, Petitioner's Exhibit 1, 2) Thereafter, the Stacys proceeded to clean the premises and commence installing a ceiling in the building located on the property. They also installed a septic tank. At some undisclosed date, Ragan came to the property to obtain some of his belongings and found the Stacys there. He learned that they supposedly had purchased the property from Respondent, Ragan was of the opinion that Respondent had purported to sell the property before he had obtained the option thereon and that he had therefore defrauded the Stacys. Ragan thereupon filed a complaint against Respondent with the local Board of Realtors in latter January, 1976. About the same time, Respondent had been in the process of obtaining local permits to install the septic tank and do the other work. He discovered that the Stacys had installed a septic tank without his authorization and without obtaining a permit. He thereupon, by letter of January 21, 1976, informed the Stacys that they had done work on the property without a building permit or approval of the County Health Department and therefore was refunding the rental payment of $100. He enclosed his check in that amount, dated January 21, 1976. Although Respondent later attempted to exercise his option to purchase the property, Ragan refused to fulfill the agreement and later sold the property to the Stacys himself for $7,500. (Testimony of Respondent, R. Stacy, Ragan, Petitioner's Exhibits 3,4) Mrs. Stacy testified at the hearing that she was under the impression that she and her husband had purchased the property in question on January 10, 1976, and that the $100 payment had been a deposit for such purchase. She was under the further impression that they were to make a $2,500 down payment in February to consummate the deal. She further testified that they made the improvements on the land because of their understanding that they were going to purchase it. Mrs. Stacy had never been involved in a prior purchase of real property and is unfamiliar with contract documents and terminology. It is found that Mrs. Stacy honestly believed that she and her husband had a valid agreement to purchase the property. Her testimony that she and her husband entered into the rental arrangement in January to enable them to work on the property until they could make the down payment in February is deemed credible. (Testimony of R. Stacy) Ragan and Respondent had been involved in a prior real estate transaction and Respondent testified that Ragan had not been satisfied with that transaction, but Ragan testified to the contrary. However, Ragan talked to Respondent's broker in January, 1976, about the Stacy situation, at which time Ragan stated that he had a chance to get even with Respondent for the prior transaction and that he was going to do so. (Testimony of Respondent, Ragan, Duncklee, D. Holland)
Recommendation That the Administrative complaint be dismissed. DONE and ENTERED this 8th day of March, 1979, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Joseph A. Doherty, Esquire Florida Real Estate Commission Post Office Box 1900 Orlando, Florida 32802 Ed R. Miller, Esquire Suite 212 - 1400 Gulf Shore Boulevard Naples, Florida 33940
The Issue The issue is whether Respondent, a Florida-licensed yacht salesman, should be disciplined for violation of Rule 61B- 60.006(2), Florida Administrative Code, as alleged in the Administrative Complaint dated May 10, 2000.
Findings Of Fact At all times pertinent to the issues herein, DBPR, through its Division of Florida Land Sales, Condominiums and Mobile Homes (the Division) was the state agency in Florida responsible for the licensing and discipline of yacht salespersons and brokers in this state and the regulation of the yacht-brokering profession. Respondent, Justo Lamar (Lamar), has been licensed as a yacht salesperson since November 1976. Prior to this action, Lamar has never been the subject of disciplinary action arising out of the practice of his profession. This action was precipitated by a yacht owner, Juan A. Galan (Galan), who unsuccessfully attempted to sell his yacht to a client of Lamar's. In July 1998, Galan listed his yacht, the Caliente, for sale through Ardell Yacht and Ship Brokers (Ardell). The listing resulted in negotiations for the purchase of the Caliente by one Larry Griggs (Griggs), a prospective customer represented by Lamar. At all times relevant to this case, Lamar was acting as a sales agent for Allied Marine and its broker, Dwight Tracy (Tracy). As set forth in more detail below, the negotiations between Galan and Griggs took place over a three-month period from October 1998 through December 1998 with no meeting of the minds. On July 12, 1999, some seven months after negotiations between Griggs and Galan terminated, Galan lodged a complaint with DBPR. Although the complaint was ostensibly directed against salesman Lamar and broker Tracy, each and every allegation in the complaint was directed to the broker's conduct, not Lamar's. Galan, who did not testify at final hearing, alleged in his complaint that "Broker presented a contract representing that deposit had been received/deposited (upon acceptance). In fact, broker never deposited check and we wasted our time and money on survey/sea trial as buyer was not (at that time or any time later) financially capable of buying boat @ $1.75 million." Galan provided some, but by no means all, of the documents which revealed the details of the prolonged and ultimately unsuccessful negotiations between Galan and Griggs. In the narrative portion of his complaint, Galan asserted that he lost money on sea trials and implied, without actually stating, that the Caliente had been taken off the market during the pendency of negotiations with Griggs. For reasons which remain unclear, the Division did not focus its investigation on Tracy, who was the obvious target of Galan's complaint. Instead, it targeted Lamar, who was an obvious add-on target of Galan's ire. The exhibits reveal a complex series of offers and counteroffers and jockeying for negotiating advantage, not just between Galan and Griggs as prospective Seller and Buyer of the Caliente, but also between Lamar and the two brokers, all three of whom stood to profit if the transaction were consummated. Negotiations for the Caliente began in late October 1998. On October 30, 1998, Lamar's client Griggs, through a corporation he controlled, issued a $150,000 check for "Deposit, 72' (sic) Caliente Sportfisherman." This check accompanied a Brokerage Purchase and Sale Agreement dated October 29, 1998, offering to purchase the Caliente for $1,500,000. That same day, Galan's representatives faxed Lamar to advise that Griggs' offer was insufficient. Lamar forthwith provided the check to his broker, Tracy. Negotiations between Galan and Griggs continued in November. Galan chose to by-pass his own Broker and negotiate directly with Lamar over lunch on November 18, 1998. Lamar wrote Galan's demands on the back of a restaurant placemat. The primary sticking point was Galan's insistence on a "bottom line" of $1,665,000 to him, after all commissions and other expenses, if any, were paid. Griggs nevertheless persevered in his effort to buy the Caliente for $1,500,000. On November 24, 2000, Griggs executed another Brokerage Purchase and Sale Agreement in which he offered an entity called Majua, Inc., of which Galan was President, the opportunity to sell the Caliente to Griggs for $1,500,000. Galan signed the November 24 agreement, but added an addendum which materially changed the terms. The addendum unilaterally purported to raise the sales prices to Galan's previously stated "bottom line" of $1,665,000. Thanksgiving passed, and negotiations wore on. On December 4, 1998, Griggs executed a third Brokerage Purchase and Sale Agreement, raising his offer to $1,755,000. The new offer expressly stipulated that Griggs' $150,000 earnest money check could be deposited when and if all parties executed this new proposed agreement. Like the October 29 and November 24 brokerage purchase and sale agreements, the December 4 document never ripened into a contract. The December 4 document was a clear and unembarrassed reminder from Griggs that an earnest money check had been written by Griggs, but was not on deposit, and was not going to be on deposit until such time as Galan had signed off on the contract as written by Griggs. Galan nevertheless permitted a sea trial of the Caliente in furtherance of negotiations, now in their fifth week. Also as part of the negotiating process, Galan permitted some, but not all, of the inspections requested by Griggs. Expenses for the sea trial and inspections were borne entirely by Griggs. By Christmas Eve, relations between the parties had deteriorated to the point where Lamar retrieved the check from the Allied Marine corporate files and returned it to Griggs. At no time did negotiations with Lamar's client Griggs preclude or interfere with efforts by Galan to negotiate with and sell the Caliente to any other prospective purchaser.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that DBPR enter a final order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED this 1st day of March, 2001, in Tallahassee, Leon County, Florida. FLORENCE SNYDER RIVAS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 2001.
The Issue Pursuant to chapter 287, Florida Statutes, and section 255.25, Florida Statutes,1/ the Department of Management Services (DMS) released an Invitation to Negotiate for a contract to provide tenant broker and real estate consulting services to the State of Florida under Invitation to Negotiate No. DMS-12/13-007 (ITN). After evaluating the replies, negotiating with five vendors, and holding public meetings, DMS posted a notice of intent to award a contract to CBRE, Inc. (CBRE) and Vertical Integration, Inc. (Vertical). At issue in this proceeding is whether DMS’s intended decision to award a contract for tenant broker and real estate consulting services to CBRE and Vertical is contrary to DMS’s governing statutes, its rules or policies, or the ITN’s specifications, or was otherwise clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Based on the demeanor and credibility of the witnesses and other evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Background5/ DMS released Invitation to Negotiate No. DMS-12/13-007 on March 18, 2013, and released a revised version of the ITN on May 14, 2013, for the selection of a company to provide tenant broker and real estate consulting services to the State of Florida. Thirteen vendors responded to the ITN. The replies were evaluated by five people: Bryan Bradner, Deputy Director of REDM of DMS; Beth Sparkman, Bureau Chief of Leasing of DMS; Rosalyn (“Roz”) Ingram, Chief of Procurement, Land and Leasing of the Department of Corrections; Clark Rogers, Purchasing and Facilities Manager of the Department of Revenue; and Janice Ellison, Section Lead in the Land Asset Management Section of the Department of Environmental Protection. Five vendors advanced to the negotiation stage: Cushman (score of 87), JLL (score of 87), CBRE (score of 87), Vertical (score of 89), and DTZ (score of 86). DTZ is not a party to this proceeding. The negotiation team consisted of Beth Sparkman, Bryan Bradner, and Roz Ingram. Janice Ellison participated as a subject matter expert. DMS held a first round of negotiations and then held a public meeting on July 16, 2013. DMS held a second round of negotiations and then held a second public meeting on August 1, 2013. A recording of this meeting is not available, but minutes were taken. Also on August 1, 2013, DMS posted Addendum 8, the Request for Best and Final Offers. This Addendum contained the notice that “Failure to file a protest within the time prescribed in section 120.57(3) . . . shall constitute a waiver of proceedings under chapter 120 of the Florida Statutes.” The vendors each submitted a BAFO. DMS held a final public meeting on August 14, 2013, at which the negotiation team discussed the recommendation of award. All three members of the negotiation team recommended Vertical as one of the two vendors to receive the award. For the second company, two of the three negotiation team members recommended CBRE and one negotiation team member recommended JLL. DMS prepared a memorandum, dated August 14, 2013, describing the negotiation team’s recommendation of award. The memorandum comprises the following sections: Introduction; The Services; Procurement Process (subsections for Evaluations and Negotiations); Best value (subsections for Selection Criteria, Technical Analysis, Price Analysis, and Negotiation Team’s Recommendation); and Conclusion. Attached to the memorandum as Attachment A was a memorandum dated April 30, 2013, appointing the evaluation and negotiation committees, and attached as Attachment B was a spreadsheet comparing the vendors’ BAFOs. DMS posted the Notice of Intent to Award to CBRE and Vertical on August 16, 2013. Cushman and JLL timely filed notices of intent to protest the Intent to Award. On August 29, 2013, JLL timely filed a formal protest to the Intent to Award. On August 30, 2013, Cushman timely filed a formal protest to the Intent to Award. An opportunity to resolve the protests was held on September 9, 2013, and an impasse was eventually reached. On October 10, 2013, DMS forwarded the formal protest petitions to DOAH. An Order consolidating JLL’s protest and Cushman’s protest was entered on October 15, 2013. Scope of Real Estate Services in the ITN Prior to the statutory authority of DMS to procure real estate brokerage services, agencies used their own staff to negotiate private property leases. Section 255.25(h), Florida Statutes, arose out of the legislature’s desire for trained real estate professionals to assist the State of Florida with its private leasing needs. The statutorily mandated use of tenant brokers by agencies has saved the state an estimated $46 million dollars. The primary purpose of the ITN was to re-procure the expiring tenant broker contracts to assist state agencies in private sector leasing transactions. Once under contract, the selected vendors compete with each other for the opportunity to act on behalf of individual agencies as their tenant broker, but there is no guarantee particular vendors will get any business. The core of the services sought in the ITN was lease transactions. The ITN also sought to provide a contract vehicle to allow vendors to provide real estate consulting services, including strategies for long and short-term leases, space planning, and space management as part of the negotiation for private leases. As part of providing real estate consulting services, vendors would also perform independent market analyses (IMAs) and broker opinions of value (BOVs) or broker price opinions (BPOs). In almost all instances, this would be provided at no charge as part of the other work performed for a commissionable transaction under the resulting contract. However, the resulting contract was designed to allow agencies to ask for an IMA or BOV to be performed independently from a commissionable transaction. In addition to the primary leasing transactions, the contract would also allow state agencies to use the vendors for other services such as the acquisition and disposition of land and/or buildings. These services would be performed according to a Scope of Work prepared by the individual agency, with compensation at either the hourly rates (set as ceiling rates in the ITN), set fees for the service/project, or at the percentage commission rate negotiated between the vendor and the individual agency. However, these services were ancillary to the main purpose of the contract, which was private leasing. In Florida, most state agencies are not authorized to hold title to land. However, the Department of Environmental Protection (DEP) serves as staff for the Board of Trustees of the Internal Improvement Trust Fund (“Board”), which holds title to land owned by the State of Florida. In that capacity, DEP buys and sells land and other properties on behalf of the Board. DEP recently began using the current DMS tenant broker contract for acquisitions and dispositions. The process was cumbersome under the current contract, so DEP asked to participate in the ITN in order to make the contract more suitable for their purposes. The ITN was revised to include DEP’s proposed changes, and DMS had Ms. Ellison serve first as an evaluator and later as a subject matter expert. At hearing, Ms. Ellison testified that she was able to participate fully, that her input was taken seriously, and that the proposed contract adequately addressed DEP’s concerns. While DEP anticipated that under the proposed contract it would use more BOVs than it had previously, there was no guarantee that DEP would use the proposed contract. DEP is not obligated to use the contract and maintains the ability to procure its own tenant brokers. Additionally, administration and leadership changes may cause a switch of using in-house agency employees instead of tenant brokers to perform real estate acquisition and disposition services. Specifics of the ITN The ITN directed vendors to submit a reply with the following sections: a cover letter; completed attachments; pass/fail requirements; Reply Evaluation Criteria; and a price sheet. The Reply Evaluation Criteria included Part A (Qualifications) and Part B (Business Plan). Qualifications were worth 40 points, the Business Plan was worth 50 points, and the proposed pricing was worth 10 points. For the Business Plan, the ITN requested a detailed narrative description of how the vendors planned to meet DMS’s needs as set forth in section 3.01, Scope of Work. The ITN requested that vendors describe and identify the current and planned resources and employees to be assigned to the project and how the resources would be deployed. Section 3.01, Scope of Work, states that the primary objective of the ITN is to “identify brokers to assist and represent the Department and other state agencies in private sector leasing transactions.” The ITN states that the contractor will provide state agencies and other eligible users with real estate transaction and management services, which include “document creation and management, lease negotiation and renegotiation, facility planning, construction oversight, and lease closeout, agency real estate business strategies, pricing models related to relocation services, project management services, acquisition services, and strategic consulting.” Id. The ITN also specifies: Other real estate consulting services such as property acquisitions, dispositions, general property consulting, property analysis and promotions, property marketing, property negotiation, competitive bidding or property, property auctions and direct sales or those identified in the reply or negotiation process and made part of the Contract (e.g., financial services, facilities management services, lease v. buy analyses). The ITN lists the following duties the contractor will perform: Act as the state’s tenant broker, to competitively solicit, negotiate and develop private sector lease agreements; Monitor landlord build-out on behalf of state agencies; Provide space management services, using required space utilization standards; Provide tenant representation services for state agencies and other eligible users during the term of a lease; Identify and evaluate as directed strategic opportunities for reducing occupancy costs through consolidation, relocation, reconfiguration, capital investment, selling and/or the building or acquisition of space; Assist with property acquisitions, dispositions, general property consulting, property analysis and promotions, property marketing, property negotiation, competitive bidding property, property auctions and direct sales; and Provide requested related real estate consulting services. The ITN set the commission percentage for new leases at 4 percent for years 1-10 and 2 percent for each year over 10 years; 2 percent for lease renewals, extensions, or modifications; and 2 percent for warehouse or storage space leases. Id. For “other services,” the ITN states: With respect to all other services (e.g., space management services, general real estate consulting services, property acquisitions, dispositions, general property consulting, property analysis and promotions, property marketing, property negotiation, competitive bidding or property, property auctions and direct sales), compensation will be as outlined in an agency prepared Scope of Work and will be quoted based on hourly rates (set as ceiling rates in this ITN), set fees for the service/project or by percentage commission rate as offered and negotiated by the broker and the using agency. The ITN also required that vendors specify the number of credit hours to be given annually to DMS. Each vendor gives a certain number of credit hours at the start of each year under the contract. The state earns additional credit hours as the vendors perform transactions. DMS manages the pool of accumulated credit hours and gives them to individual agencies to use on a case-by-case basis as payment for individual projects. These credit hours are commonly allocated to pay for IMAs and BOVs that are not part of commissionable transactions. With the exception of one legislatively mandated project, DMS has never exhausted its pool of credit hours. The ITN further specified that IMAs and BOVs must be offered at no cost when performed as part of a commissionable transaction. Historically, most IMAs and BOVs are performed as part of a commissionable transaction. They have only been performed separately from a commissionable transaction a handful of times under the current contract, and many of these were still provided at no cost through the allocation of free credit hours available to the agencies. Therefore, most IMAs and BOVs to be performed under the proposed contract will likely be at no cost. The ITN states that points to be awarded under the price criterion will be awarded based on the number of annual credit hours offered and the commission rate paid per transaction per hour of commission received. The ITN further provides that DMS will evaluate and rank replies in order to establish a competitive range of replies reasonably susceptible to award, and then the team will proceed to negotiations. Regarding negotiations, the ITN states: The focus of the negotiations will be on achieving the solution that provides the best value to the state based upon the selection criteria and the requirements of this solicitation. The selection criteria include, but are not limited to, the Respondent’s demonstrated ability to effectively provide the services, technical proposal and price. The Department reserves the right to utilize subject matter experts, subject matter advisors and multi-agency or legislative advisors to assist the negotiation team with finalizing the section criteria. The negotiation process will also include negotiation of the terms and conditions of the Contract. The ITN also states: At the conclusion of negotiations, the Department will issue a written request for best and final offer(s) (BAFOs) to one or more of the Respondents with which the negotiation team has conducted negotiations. At a minimum, based upon the negotiation process, the BAFOs must contain: A revised Statement of Work; All negotiated terms and conditions to be included in Contract; and A final cost offer. The Respondent’s BAFO will be delivered to the negotiation team for review. Thereafter, the negotiation team will meet in a public meeting to determine which offer constitutes the best value to the state based upon the selection criteria. The Department does not anticipate reopening negotiations after receiving BAFOs, but reserves the right to do so if it believes doing so will be in the best interests of the State. The ITN and draft contract permit subcontractors to perform under the contract and provide an avenue for a contractor to add subcontractors by submitting a written request to DMS’s contract manager with particular information. Best and Final Offers After the conclusion of negotiations, the negotiation team requested each vendor to submit a BAFO, to be filled out in accordance with the RBAFO format. The RBAFO noted that each vendor would get a set percentage commission for leasing transactions, but asked vendors to submit their prices for IMAs, BOVs, and BPOs performed outside a commissionable transaction and to submit the number of annual credit hours vendors would give DMS at the start of the new contract. In an effort to increase potential savings to the state, DMS lowered the percentage rates of the commissions for lease transactions in the RBAFO below the rates initially set in the ITN. By selecting only two vendors instead of three, the additional potential volume for each vendor on the contract could support the lower commission rates being requested of tenant brokers. The state would ultimately save money due to the impact of the reduced commissions on the overall economic structure of each lease. Beth Sparkman, Bureau Chief of Leasing of DMS, expounded on the rationale for reducing the number of vendors under the new contract to two: The Court: To me, it’s counterintuitive that having fewer vendors would result in more favorable pricing for the state of Florida; and yet you said that was the anticipated result of reducing the number of vendors from three to two – The Witness: Correct. The Court: -- for the new contract. I’m unclear. Tell me the basis for the team’s anticipation that having fewer vendors would result in better pricing. The Witness: When the original ITN was released, it had the same percentages in there that are under the current contract. And I’ll talk, for context, new leases, which right now is at 4 percent. So the discussion was – and 4 percent is typical of the industry. That’s typical for what the industry pays across the board. So the desire was to reduce the commission, to reduce those commission amounts to drive that percentage down. So we went out with the first BAFO that had a range that said for leases that cost between zero – and I can’t remember – zero and a half million, what would your percentage be? Thinking that when we had a tiered arrangement, those percentages would come down. They really didn’t. So when we sat down as a team and discussed: Well, why didn’t they – and you know, because typical is 4 percent. So we came back and said: Well, if we reduce the percentage on new leases to 3.25 but restrict the reward to two vendors, each vendor has the potential to make as much money as they would have made at 4 percent, but the savings would be rolled back into the state. Each of the five vendors invited to negotiate submitted a BAFO, agreeing as part of their submissions to comply with the terms and conditions of the draft of the proposed contract and agreeing to the lowered set percentage commission rates in the RBAFO. The RBAFO listed selection criteria by which the vendors would be chosen, to further refine the broad criteria listed in the ITN. The RBAFO listed the following nine items as selection criteria: performance measures (if necessary), sliding scale/cap, IMA set fee, broker’s opinion of value, balance of line (can be quoted per hour or lump sum), contract concerns, credit hours (both annual and per deal hour), hourly rates, and vendor experience and capability. CBRE’s BAFO submission followed the format indicated in the RBAFO, but CBRE included an additional section giving its proposed commission rates for acquisitions and dispositions of land. These rates were also submitted by other vendors at other parts of the procurement process, but CBRE was the only vendor to include such rates as part of its BAFO submission. DMS considered this addition a minor irregularity that it waived. In its BAFO submission, Cushman offered a three-tiered approach to its pricing for IMAs and BOVs. For the first tier, Cushman offered to perform IMAs and BOVs for free as part of a commissionable transaction. This is redundant, as the ITN required all vendors to perform IMAs and BOVs at no cost when part of a commissionable transaction. For the second tier, Cushman offered to perform IMAs and BOVs at no cost when the user agency has previously hired Cushman on tenant representative work. Ms. Sparkman testified that this provision was unclear, as Cushman did not define the scope of this provision or what amount of work qualified the agency for free services. For the third tier, Cushman offered to perform IMAs and BOVs for $240 when not part of a commissionable transaction for an agency with which it had never done business. Best Value Determination The five BAFOs were sent to the negotiation team for review on August 8, 2013, and on August 14, 2013, the team met in a public meeting to discuss the BAFOs, consider the selection criteria, discuss the team’s award recommendation, and draft a written award recommendation memorandum. During the August 14, 2013, meeting the team determined that CBRE and Vertical represented the best value to the state, by a majority vote for CBRE and by a unanimous vote for Vertical. Ms. Sparkman stated at the meeting that, from her perspective, CBRE and Vertical represented a better value than the other vendors because they were more forward thinking in their long term business strategies for managing Florida’s portfolio. Also at this meeting, Ms. Sparkman noted that CBRE’s prices for IMAs and BOVs were somewhat high but that she would attempt to convince CBRE to lower its prices during the contract execution phase. This was part of an attempt to equalize costs to ensure user agencies selected vendors based on individual needs rather than cost. However, CBRE represented the best value to the state regardless of whether its pricing changed. At hearing, Ms. Sparkman testified that if CBRE had refused to lower its pricing, DMS would still have signed a contract with them based on the pricing submitted in its BAFO. Ms. Sparkman also stated at the public meeting that if she were unable to come to contract with both CBRE and Vertical, she would arrange for another public meeting to select a third vendor with whom to proceed to the contract execution phase. This statement did not refer to DMS selecting a third vendor to replace CBRE should CBRE refuse to lower its price, but rather reflected the possibility that during the contract execution phase, DMS and either one of the vendors could potentially be unable to sign a contract because the vendor was unwilling to execute the written terms and conditions. The “contract negotiations” referenced during the public meeting are the remaining processes to be worked out during the contract execution phase and are distinct and separate from the negotiation phase. At hearing, Ms. Sparkman testified that in the past, vendors have refused to sign a contract because their legal counsel was unwilling to sign off on what the business representatives agreed to. Thus, if either CBRE or Vertical refused to sign the contract altogether, DMS would potentially have selected a third-place vendor in order to have a second vendor on the contract, according to Ms. Sparkman. International experience weighed in favor of CBRE and Vertical, according to team member comments made at the public meeting. Although the phrase “international experience” was not specifically listed in the selection criteria of the ITN or RBAFO, many vendors highlighted their international experience as part of the general category of vendor experience. Vendor experience and capability is specified in both the ITN and RBAFO as part of the selection criteria. Ms. Sparkman testified that international experience is indicative of high quality general vendor experience because international real estate market trends change more rapidly than domestic market trends. None of the negotiation team members recommended Cushman for a contract award, and in fact, Cushman's name was not even discussed at the award meeting. The Award Memorandum Also during the August 14, 2013, public meeting the negotiation team prepared a memorandum setting forth the negotiation team’s best value recommendation of CBRE and Vertical, and many of its reasons for the recommendation. There was no requirement that the memorandum list every single reason that went into the decision. For example, the memorandum did not state that the team found CBRE and Vertical’s focus on long term strategies more impressive than Cushman’s focus on past performance under the current contract. The award memorandum included a “Selection Criteria” section which simply repeated the nine selection criteria that had been previously identified in the RBAFO. The memorandum then went on to include a section labeled “B. Technical Analysis” that stated: Analysis of pricing is provided in section C below. As to the remaining selection criteria items, the Team identified the following key elements for the service to be provided: Long term strategies Key performance indicators Management of the portfolio Top ranked vendors had comprehensive business plans Pricing on the BOV and IMAs. The selection criteria provided above were used by the Team to make its best value recommendation. Ms. Sparkman testified that while the choice of wording may have been imprecise, the items listed in the Technical Analysis section were simply elaborations of the selection criteria in the ITN and RBAFO, and not new criteria. The first four are subsumed within vendor experience and capability, and the fifth was specifically listed in the RBAFO. Indeed, Cushman’s Senior Managing Director testified at hearing that Cushman had addressed the first four items in their presentation to DMS during the negotiation phase to demonstrate why Cushman should be chosen for the contract. The memorandum failed to note that CBRE had included non-solicited information in its BAFO regarding proposed rates for the acquisition and disposition of land. However, the negotiation team considered CBRE’s inclusion of these proposed rates a minor irregularity that could be waived in accordance with the ITN and addressed in the contract execution phase, since those rates were for ancillary services, and there was no guaranteed work to be done for DEP under that fee structure. The memorandum included a chart, identified as Attachment B, that compared the proposed number of credit hours and some of the pricing for IMAs and BOVs submitted by the vendors in their BAFOs. The chart listed Cushman’s price for IMAs and BOVs as $240 and failed to include all the information regarding the three-tiered approach to IMAs and BOVs Cushman listed in its BAFO. However, Ms. Sparkman testified that the chart was meant to be a side-by-side basic summary that compared similar information, not an exhaustive listing. The Cushman Protest Negotiations After Award of the Contract Cushman alleges that DMS’s selection of CBRE violates the ITN specifications because DMS selected CBRE with the intent of conducting further negotiations regarding price, which provided CBRE with an unfair advantage. Cushman further argues that the procedure of awarding to one vendor and then possibly adding another vendor if contract negotiations fail violates Florida’s statutes and the ITN. Amended Pet. ¶¶ 23, 28 & 31. Section 2.14 of the ITN specifically reserved DMS's right to reopen negotiations after receipt of BAFOs if it believed such was in the best interests of the state. Specifically, section 2.14 A. provides: The highest ranked Respondent(s) will be invited to negotiate a Contract. Respondents are cautioned to propose their best possible offers in their initial Reply as failing to do so may result in not being selected to proceed to negotiations. If necessary, the Department will request revisions to the approach submitted by the top-rated Respondent(s) until it is satisfied that the contract model will serve the state’s needs and is determined to provide the best value to the state. The statements made by Ms. Sparkman at the August 14, 2013, public meeting and in the award memorandum, that DMS would attempt to reduce CBRE's prices for ancillary services during the contract execution process were not contrary to the ITN or unfair to the other vendors. Both Ms. Sparkman and Mr. Bradner, the two negotiation team members who voted to award to CBRE, testified that they recommended CBRE as providing the best value even considering its arguably higher prices for ancillary services. Ms. Sparkman further confirmed that even if CBRE refused to lower its prices during the contract execution phase, DMS would still sign the contract, as CBRE's proposal would still represent the best value to the state. The anticipated efforts to obtain lower prices from CBRE were simply an attempt to obtain an even better best value for the state. Ms. Sparkman also testified that section 2.14 F. allowed continued negotiations, even though it was silent as to timeframe. Paragraph F states: In submitting a Reply a Respondent agrees to be bound to the terms of Section 5 – General Contract Conditions (PUR 1000) and Section 4 – Special Contract Conditions. Respondents should assume those terms will apply to the final contract, but the Department reserves the right to negotiate different terms and related price adjustments if the Department determines that it provides the best value to the state. Ms. Sparkman also cited section 2.14 I. as authority for reopening negotiations following receipt of the BAFO’s. That section provides: The Department does not anticipate reopening negotiations after receiving the BAFOs, but reserves the right to do so if it believes doing so will be in the best interests of the state. Ms. Sparkman’s statement that if DMS failed, for any reason, to successfully contract with either of the two vendors selected, it would consider pulling in another vendor, is not inconsistent with the clear language of the ITN. Selection Criteria Cushman alleges that DMS used criteria to determine the awards that were not listed in the ITN or the RBAFO. Amended Pet. ¶ 25. Section 2.14 E of the ITN established broad selection criteria, stating: The focus of the negotiations will be on achieving the solution that provides the best value to the state based upon the selection criteria and the requirements of this solicitation. The selection criteria include, but are not limited to, the Respondent's demonstrated ability to effectively provide the services, technical proposal and price. The Department reserves the right to utilize subject matter experts, subject matter advisors and multi-agency or legislative advisors to assist the negotiation team with finalizing the selection criteria. The negotiation process will also include negotiation of the terms and conditions of the Contract. (emphasis added). Following the negotiations, and with the assistance of its subject matter expert, the negotiation team provided in the RBAFO additional clarity as to the selection criteria, and identified the "Basis of Award/Selection Criteria" as follows: Performance Measures (if necessary) Sliding scale/cap IMA set fee Broker's opinion of value Balance of line (can be quoted per hour or lump sum) Contract concerns Credit hours (both annual and per deal hour) Hourly rates Vendor experience and capability The foregoing selection criteria, as well as the selection criteria stated initially in the ITN, make clear that pricing was only one of the criteria upon which the award was to be made. Indeed, Cushman's representative, Larry Richey, acknowledged during his testimony that criteria such as "Performance Measures," "Contract Concerns," and "Vendor Experience and Capability" did not refer to pricing, but rather to the expected quality of the vendor's performance if awarded the contract. As the principal draftsman of the ITN and DMS's lead negotiator, Ms. Sparkman explained that the RBAFO's statement of the selection criteria was intended to provide greater detail to the broad selection criteria identified in the ITN, and was used by the negotiation team in making its best value determination. Ms. Sparkman further testified that the best value determination resulted from the negotiation team's lengthy and extensive evaluation of the vendors' initial written replies to the ITN, review of the vendors' qualifications and comprehensive business plans, participation in approximately two and a half hours of oral presentations by each vendor (including a question and answer session with regard to the proposed implementation and management of the contracts), and a review of the vendors' BAFOs. Applying the selection criteria contained in the ITN and the RBAFO, the negotiation team selected Vertical for several reasons, including its performance indicators, employees with ADA certification, computer programs and employee training not offered by other vendors, its presence in Florida, and the strength of its business plan and presentation. Similarly, the negotiation team selected CBRE for an award based on the strength of its ITN Reply, its broad look at long-term strategies, its key performance indicators, the experience and knowledge of its staff, the comprehensiveness of its proposal and business plan, size of its firm, and creative ideas such as use of a scorecard in transactions. Ms. Sparkman observed that both Vertical and CBRE specifically identified the CBRE staff who would manage the state's business and daily transactions, while it was not clear from Cushman's ITN reply and related submissions who would actually be working on the account. Cushman likewise did not discuss out-of-state leases and how such leases were going to be handled, which was a significant concern because DMS considered out-of-state leases to be particularly complex. Ms. Sparkman also noted that with respect to the vendors' business plans, both Vertical and CBRE focused primarily on strategic realignment and plans for the future, whereas Cushman discussed their current transactions at length, but did not demonstrate forward thinking to the negotiation team. Cushman's reply to the ITN also included various discrepancies noted at the final hearing. While Cushman's ITN reply identifies a Tallahassee office, Cushman does not in fact have a Tallahassee office, but instead listed its subcontractor’s office.6/ Additionally, two of the business references presented in Cushman's ITN Reply appear not in fact to be for Cushman, but instead for its subcontractor, Daniel Wagnon, as Cushman's name was clearly typed in above Mr. Wagnon's name after the references were written. Finally, Cushman failed to provide in its ITN Reply the required subcontractor disclosure information for at least one of its "Project Management Partners," Ajax Construction. Based on all of the above, DMS's decision to award contracts to Vertical and CBRE as providing the best value to the state was not arbitrary, capricious, clearly erroneous, or contrary to competition. Simply stated, and as the negotiation team determined, the submissions by Vertical and CBRE were more comprehensive and reasonably found to offer better value to the state than Cushman's submission. Indeed the negotiation team did not even mention Cushman as a potential contract awardee, but instead identified only Vertical, CBRE and JLL in their deliberations as to best value. Cushman's argument that DMS award memorandum improperly relies on the following as "key elements" related to services does not alter this analysis: Long term strategies Key performance indicators Management of the portfolio Top ranked vendors had comprehensive business plans Pricing on the BOV and IMAs. While Ms. Sparkman acknowledged that the choice of language in the memorandum could have been better, it is clear that the foregoing are indeed "elements" of the selection criteria stated in the ITN and RBAFO, as the first four elements plainly relate to the vendors' ability to effectively provide the services, their technical proposal, performance measures, and vendor experience and capability, while the last element relates to the pricing portion of the criteria. Cushman also argues that the award memorandum failed to inform the final decision-maker that Cushman offered IMAs and BOVs at no charge when Cushman was engaged in a commissionable transaction or was performing other work for an agency under the contract. As a result, Cushman asserts, the Deputy Secretary was provided with inaccurate information relating to price. Cushman's argument that the award process was flawed because the pricing chart attached to the award memorandum did not accurately reflect Cushman's proposed pricing is without merit. As Ms. Sparkman testified, the chart was prepared by the negotiation team to provide for the decision-maker an apples-to- apples broad summary comparison of the vendor's proposed pricing for the proposed ancillary services. The chart was not intended to identify all variations or conditions for potential different pricing as proposed by Cushman.7/ Best Value Determination Cushman contends that the negotiation team’s decision to award a contract to CBRE did not result in the best value to the state. Amended Pet. ¶¶ 26, 28 & 29. Cushman further argues that DMS did not meaningfully consider differences in proposed pricing. The failure to consider price for potential ancillary services, Cushman argues, was contrary to competition as it gave an unfair advantage to CBRE whose prices were higher than Cushman’s prices in all but one category. Although pricing for the potential ancillary services was relevant, the ITN's initial scoring criteria made clear that DMS was primarily focused on evaluating the experience and capability of the vendors to provide the proposed services. For this reason, the ITN's initial scoring criteria awarded 90 percent of the points based upon the qualifications and business plan of the vendors, and only 10 percent of the points based on the pricing for potential ancillary services. The negotiation team members testified that this same focus on qualifications and the vendors' business plan continued during the negotiation phase and award decision, although without reliance on the mathematical scoring process utilized during the initial evaluation phase. Nothing in the ITN specifications altered this focus, and the negotiations were directed to gaining a greater understanding of the vendors' proposed services, the qualifications and bios of individuals who would actually do the work, vendors' approach to the work and parameters the vendors would use to evaluate their performance. Pricing remained of relatively minor significance primarily because the RBAFO established a uniform lease commission rate for all vendors, effectively removing pricing as a means to differentiate between the vendors. As a result, vendors were required to quote pricing only for certain potential ancillary services, including IMAs and BOVs, and the number of free credit hours to be provided to the state. Pricing for these potential ancillary services was not considered particularly important, since historically these services were seldom used, and the ITN required all vendors to provide IMAs and BOVs free of charge when related to a commissionable transaction (thereby greatly reducing the impact of any "free" IMA or BOV services). For these reasons, the negotiation team considered the potential ancillary services and pricing for these services not to be significant in the award decision and only incidental to the core purpose and mission of the intended contract, to wit, leasing and leasing commissions. As a result, the negotiation team referred to these potential ancillary services as "balance of line" items which were nominal and added little value to the contract. Notwithstanding Cushman's argument that it should have been awarded the contract because it offered the lowest pricing for these ancillary services, its prices were not in fact the lowest offered by the vendors. Indeed JLL offered to provide all IMA and BOV services (with no preconditions) at no cost. Cushman's pricing for the ancillary services also was not materially different than CBRE's pricing. CBRE's consulting services rates are comparable, if not lower, than Cushman's rates, and the difference between Cushman's and CBRE's proposed charges for IMAs and BOVs is only a few hundred dollars. When considered in terms of the anticipated number of times the ancillary services will be requested (rarely, based on the prior contract), the total "extra" amount to be spent for CBRE's services would be at most a few thousand dollars. The negotiation team reasonably considered this to be insignificant in comparison to the multimillion dollar leasing work which was the core purpose of the intended contract.8/ Because pricing for the potential ancillary services was of lesser significance to DMS's award decision, Cushman's position that DMS should have awarded Cushman a contract based upon its pricing for ancillary services is not consistent with the ITN and does not render DMS's intended awards to Vertical and CBRE arbitrary, capricious, clearly erroneous or contrary to competition. To the contrary, DMS articulated a rational, reasonable and logical explanation for the award. CBRE’s Proposal Non-Responsive to ITN and RBAFO? Cushman alleges that CBRE’s BAFO was not responsive to the ITN and the RBAFO because CBRE included a set rate for acquisitions and dispositions in its proposal. Amended Pet. 30. Since CBRE's BAFO materially deviated from the ITN's specifications, CBRE’s proposal should have been deemed non- responsive and therefore rejected, Cushman argues. The ITN originally requested pricing related only to credit hours as the ITN set the rates for leases. The ITN stated that “other services” would be determined on a case-by- case basis as negotiated by the agencies. However, as part of the ITN process, DMS discussed with the vendors the potential for them to assist the state in the sale and acquisition of property, and what commission rates might be charged for this work. For this reason, CBRE included proposed commission rates for acquisition and disposition services in its BAFO. DMS considered the inclusion of potential rates for acquisitions and dispositions to be a minor irregularity which did not render CBRE's BAFO non-responsive. This determination is consistent with the terms of the ITN, which at section 2.14(g) states "[t]he Department reserves the right to waive minor irregularities in replies." The form PUR 1001 incorporated by reference into the ITN likewise reserves to DMS the right to waive minor irregularities and states: 16. Minor Irregularities/Right to Reject. The Buyer reserves the right to accept or reject any and all bids, or separable portions thereof, and to waive any minor irregularity, technicality, or omission if the Buyer determines that doing so will serve the state's best interests. The Buyer may reject any response not submitted in the manner specified by the solicitation documents. Consistent with the above-cited provisions, the negotiation team noted at its August 14, 2013, meeting that CBRE's inclusion of the proposed rates was not material, and that during the contract execution process, DMS would either exclude the proposed rates from the contract, or possibly include such as a cap for these services. Both of these alternatives were available to DMS given CBRE's commitment to follow the terms of the draft contract, which specifically stated that fees for acquisitions and dispositions would be negotiated on a case-by-case basis. Finally, CBRE's inclusion of proposed commission rates for acquisitions and dispositions did not give CBRE an advantage over the other vendors, or impair the competition, because Cushman and JLL also submitted, as part of their ITN responses, proposed commission rates for the acquisition and disposition of property. Do the ITN Specifications Violate Section 255.25? Cushman's final argument is that the ITN specifications, and the proposed contract, violate section 255.25(3)(h)5., Florida Statutes, which states that "[a]ll terms relating to the compensation of the real estate consultant or tenant broker shall be specified in the term contract and may not be supplemented or modified by the state agency using the contract." Cushman's argument has two components. First, Cushman argues that the specifications included at Tab 5, page 13 of the ITN violate the statute by providing: "With respect to all other [ancillary] services, . . . , compensation shall be as outlined in an agency prepared Scope of Work and will be quoted based on an hourly rate (set as ceiling rates in this ITN), set fees for the service/project or by a percentage commission rate as offered and negotiated by the using agency.” Cushman also argues that the language in the award memorandum stating that the BOV rates are "caps" and "may be negotiated down by agencies prior to individual transactions," violates the statute. This latter reference to "caps" correlates to the "ceiling rates" stated in the above quoted ITN specification. Section 120.57(3)(b), Florida Statutes, requires vendors to file a protest to an ITN’s terms, conditions, or specifications within 72 hours of the release of the ITN or amendment; failure to protest constitutes a waiver of such arguments. DMS included this language with the release of the ITN and each amendment, so Cushman was on notice of its protest rights. Cushman's challenge to the ITN specifications as violating section 255.25 is untimely and has been waived. Having been fully informed of this specification since May 14, 2013, when the revised ITN was published, Cushman could not wait until the ITN process was completed some four months later, and then argue that the ITN specifications do not comply with section 255.25 and must be changed. Such argument plainly constitutes a specifications challenge, and such a challenge is now time-barred. Even were Cushman’s challenge not time-barred, it would still fail. Section 255.25 requires only that "[a]ll terms relating to the compensation of the real estate consultant or tenant broker shall be specified in the term contract," and not that all terms identifying the compensation be specified. The challenged ITN specification, actually added via Addendum 2 at the request of DEP and its subject matter expert, does specify the approved methods by which the state could compensate the vendor, which DMS determined would best be determined on a case-by-case basis. By stating the approved methods which can be used by the state agencies, the ITN specifications and term contract did specify the terms "relating to" the compensation of the vendor, i.e., an hourly rate (set as ceiling rates in the ITN), set fees for the service/project, or a percentage commission rate. DMS established these terms because the exact compensation would best be determined by the state agency on a case-by-case basis in a Statement of Work utilizing one of the specified compensation methods.9/
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That a final order be entered denying the petition of Cushman & Wakefield of Florida, Inc., and affirming the Notice of Intent to Award to CBRE, Inc., and Vertical Integration, Inc. DONE AND ENTERED this 24th day of January, 2014, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS 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 24th day of January, 2014.
The Issue Whether Carleen Chalk Lund, an active broker in Lund Realty, Inc. , a licensed corporate broker, failed to account or deliver to Daisy and Kenneth Parnell money in the form of a deposit which had come into her hands and which was not her property or which she was not in law or equity entitled to retain, under the circumstances, and at the time which was agreed upon or which was required by law or, in the absence of an agreed upon time, upon demand of the Parnells, who were entitled to such an accounting or delivery.
Findings Of Fact Carleen Chalk Lund and Norman Wayne Lund are registered real estate brokers holding current registration from the Florida Real Estate Commission and are active brokers in Lund Realty, Inc., a corporate broker registered with the Florida Real Estate Commission. On or about January 4, 1975, Daisy and Kenneth Parnell, the buyers, signed an offer to purchase the following real property from David and Wilma Hammer: East 184.5 ft. of NW 1/4 of SW 1/4 of Sec 6, Twp. 26 S, Range 29 E, N Osceola County. Said offer was accepted by the sellers. Subsequently, the buyers sent a telegraphic money order in the amount of $2,200 to Lund Realty, Inc. Therefore said money was deposited in the escrow account of Lund Realty, Inc. $2,000 as deposit on the Hammer's property and $200 to be used for closing costs. The following provisions of the Contract for Purchase between the buyers and the sellers are specifically noted and referenced: In accordance with provisions of paragraph 4, the contract was to be closed and the deed delivered on or before January 31, 1975. In accordance with the provisions of paragraph 6, the seller was to convey title to the aforesaid property to the buyer by agreement for deed. In accordance with the provisions of paragraph 7, the costs, if any, of preparation of closing documents and closing fee shall be borne equally by the seller and buyer. In accordance with the provisions of paragraph 9, all closing costs were to be divided equally between the buyer and seller including title insurance. In accordance with paragraph G of said standards, if the buyer failed to perform any of the covenants of the contract within the time specified, the deposit paid by the buyer might be retained by or for the account of the seller as consideration for the execution of the contract and in full settlement of any claims for camages and all parties would be relieved of all obligations under the contract and each party would execute a separate release of the other at that time. In accordance with the provisions of paragraph P of the standards, in the event that the buyer failed to perform and the aforesaid deposit was retained, the amount of the deposit was to have been divided equally between the realtor and the seller provided that the amount to be retained and received by the realtor would not exceed the full amount of the commission and that any excess would be paid to the seller. In accordance with the provisions of the paragraph "Commission to Realtor", the seller acknowledged the employment of Lund Realty, Inc. and agreed to pay Lund Realty a commission in accordance with the commission agreement. On January 25, 1975, copies of the articles of agreement, closing statement, and title insurance cost disclosure were sent by Chelsea Title and Guaranty Company to Mrs. Daisy Parnell at 88 North Pasack Road, Spring Valley, New York, 10977. The letter accompanying the aforementioned documents indicated that the sellers had executed the closing papers on that date. Said letter further indicated that as soon as the papers were signed by the recipient, that Dee A Burttram, manager of Chelsea Title and Guaranty Company, would record the articles of agreement and insure title to property. These papers were net signed and returned to Chelsea Title, and on February 14, 1975 a subsequent letter was addressed from Dee A. Burttram to airs. Daisy Parnell at the aforestated address indicating that Chelsea Title had not received the documents forwarded to Mrs. Parnell and offering further information if they had not been completed. See Composite Exhibit 10. Between January 25 and February 28, 1975 efforts were made by Lund Realty, Inc. to contact airs. Daisy Parnell without success. On February 28, 1975 it was determined that Frank Townsend, Attorney at Law practicing in Kissimmee, had been engaged by Sidney Schwartz, Attorney at Law practicing in New York, to review the contract entered into by Mrs. Daisy Parnell. According to his testimony, Frank Townsend recommended to Schwartz that Mrs. Parnell not go through with the contract until certain discrepancies in the contract were clarified. The discrepancies involved were the conflict between the provision of paragraph 2 stating that $8,000 purchase money note and mortgage to the seller while paragraph 6 indicated that the seller would convey title by an agreement for deed; the lack of a scribner's statement note on the papers to be filed with the Court; and a discrepancy between the amount of monthly payment as stated in the Contract for Sale and Purchase and the Agreement for Deed. However, by his letter of March 5, 1975 to Mrs. Daisy Parnell, Townsend refers only to problems involving the use of the Agreement for Deed which he concluded was not a problem if the sellers insisted on that form of conveyance, and the fact that the Agreement for Deed is unacceptable because it is unrecordable (an apparent reference to the fact that a scribner's notation was not made on the Agreement for Deed). By his letter of April 3, 1975 to Mr. Sidney Schwartz, Mr. Townsend indicates that he had completed all back ground work on the transaction and had advised Mr. Murray W. Over street, attorney for Mr. and Mrs. Hammer three weeks prior that he (Townsend) was ready to provide a note and mortgage in exchange for a Warranty Deed and had requested that Overstreet arrange a closing date. Mr. Townsend closes indicating that he had again contacted Mr. Overstreet reminding him that the Parnells wished to close. Several things are apparent from Townsend's letters of March 5 and April 3, 1975. It is apparent from the letter to Mrs. Parnell from Townsend dated March 5, 1975 that substantial concern existed on the part of Schwartz that the use of an Agreement for Deed in the transaction would provide to Mrs. Parnell less protection than she would have in a situation in which a note and mortgage was used. However, as stated above, Townsend pointed out that the use of an Agreement for Deed under the Florida Law would afford Mrs. Parnell the same protection as a mortgage. It is also clear from the April 3 letter that all problems related to the Parnell-Hammer transaction had been resolved, that they were ready to close but insisted upon a note and mortgage in exchange for a warranty deed, and their position had bean communicated to counsel for the Hammers. The demand for the use of a note and mortgage by the Parnells is contrary to the provisions of the Contract for Sale and Purchase between these parties entered into on January 4, 1975 and as of April 3, 1975 was the only reason for the Parnell's refusing to close. On April 3, 1975, Mr. Murray Overstreet attorney for Mr. and Mrs. Hammer, advised Frank N. Townsend, attorney for Mrs. Parnell, that the Hammers considered their Contract for Sale and Purchase with Mrs. Parnell to be null and void because the transaction was to be closed on or before January 31, 1975 and that as of April 3, 1975 the matter had not been completed. Mr. Overstreet further advised that his clients made no claim on the deposit made to Lund Realty and that said deposit might be returned to the buyers. A copy of this letter was sent to Lund Realty, Inc. Pursuant to the provisions of paragraph G of the Contract for Sale and Purchase referenced above, upon default of the buyer, the deposit paid by the buyer could be retained by or for the account of the sellers as consideration for the execution of the contract and in full settlement of any claims for damage. Under the provisions of paragraph P of said contract, said deposit would be divided equally between the realtor and seller; provided, however, that the amount retained or received by the realtor was not to exceed the full amount of the commission, in this instance $600. On April 4, 1975 in response to the copy of the letter from Overstreet to Townsend in which the Hammers declared the Contract for Purchase and Sale null and void, Lund Realty, Inc. wrote Frank Townsend advising him that the expenses for sales commission, cancellation fee, and termite inspection should be considered before any escrow funds were disbursed and requesting that Lund Realty be advised as to how Mrs. Parnell would like to handle the charges. Clearly, Lund Realty considered the Parnells to be in default and asserted a claim for commission. No evidence was received regarding any response from Townsend to the letter of Lund Realty, Inc. dated April 4, 1975. On May 14, 1975 Lund Realty wrote Mrs. Daisy Parnell sending her a check in the amount of $1,466, the amount of her deposit less expenses incurred by her for sales commission, cancellation fee, termite inspection, and insurance. The amounts of each of the expenses and copies of statements were enclosed. Although the check in question was retained by Mrs. Parnell, Lund Realty received a letter from Sidney Schwartz dated May 23, 1975 which states in pertinent part as follows: "I am led to believe that the seller in the proposed transaction did not perfect title and waived and/or released its interest in the contract. If this be so, the entire down pay ment of Mrs. Parnell must be returned to her imme- diately. Please inquire into this matter. You no doubt are aware that Mrs. Parnell has retained Florida counsel, namely, Frank N. Townsend, Esquire, Post Office Box 847, Kissimmee, Florida. This is further to advise that in the event there has been a wrongful retention of any of Mrs. Parnell's funds, complaints shall be lodged with all appropriate authorities including licen- sing authorities in the State of Florida." The next contact between the parties was a letter to Lund Realty from Frank Townsend dated June 19, 1975. In that letter, Mr. Townsend stated as follows: "This confirms our request in accordance with Mr. Overstreet's letter wherein no demand is made for any funds on behalf of the Hammers, the return of all funds deposited with you by the Parnells is specifically requested." A second follow-up letter was addressed to Lund Realty on July 14,1975 requesting a response to the aforementioned letter of June 19, 1975. It is clear that the basis for demand of return of the deposit receipt in its entirety was based on the statements in Overstreet's letter to Townsend dated April 3, 1975, that the Hammers made no claim to the deposit to Lund Realty, Inc. This position of the Hammers was subsequently clarified by Mr. Hammer in his letter of August 12 (Exhibit 7) and by Mr. Overstreet, who at the hearing, testified that the Hammers never intended to waive the amount of the commission and the cost. Lund Realty was entitled to its commission and the Hammers would have had a cause of action against the Parnells under the contract for the entire amount of the deposit. However, the existence of a dispute over claims to all or portions of the escrow funds developed slowly, and was based on whether the Hammers waived their rights to all or any portion of the escrow funds. In September 1975 Lund Realty requested an advisory opinion of the Florida Real Estate Commission regarding its duties. The conclusion of that advisory opinion was that disbursement should be made to the Parnells, and that the claims that Lund, Chelsea Title and any other individuals should be filed in a court of competent jurisdiction. The advisory opinion was silent, however, on Hammer's subsequent claim for the commission and cost from the deposit. As of the date of hearing, the $2,200 was on deposit in the escrow account of Lund Realty, Inc.
Recommendation The position and actions of the various individuals should also be considered in this case in arriving at a penalty because none of the parties have completely "clean hands." The Parnells precipitated the breach by insistence on a note and mortgage; the Hammers have made no attempt to clarify the situation by paying the commission and cost; and the attorneys kept Lund Realty completely in the dark about what was transpiring. The Lunds are the only ones involved in the transaction who have tried to carry out their obligation. Further, they also are the only ones who stand to lose financially without seeking judicial relief. While they have held the money, it has remained in escrow since the dispute arose. Based on the foregoing Findings of Fact, Conclusions of Law, and other factors bearing on the case, the Hearing Officer would recommend that the Florida Real Estate Commission place Carleen Chalk Lund on probation for one year. DONE and ORDERED this 28th day of January 1977 in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Manuel E. Oliver, Esquire Florida Real Estate Commission 2699 Lee Road Winter Park, Florida 32789 Carleen Chalk Lund 612 West Vine Street Kissimmee, Florida 32741
