The Issue The issue in this case is whether Section 320.642(2)(a), Florida Statutes, permits the relocation by Petitioner General Motors Corporation (GM) of the dealership of Petitioner Buddy Foster Chevrolet, Inc. (Foster), from its present location to a new proposed location for the sale of certain line-makes of Chevrolet vehicles. In order to make that determination, the question arises as to whether Respondent Roger Whitley Chevrolet, Inc. (University), and Respondent Gordon Stewart Chevrolet, Inc. (Stewart), are already providing adequate representation for sale of the subject Chevrolet vehicles in the community or territory of the proposed Foster relocation point.
Findings Of Fact Parties GM is a “licensee” and “manufacturer” as defined by Sections 320.60(8) and (9), Florida Statutes. Foster, Stewart, and University are “motor vehicle dealers” as defined by Section 320.60(11)(a)(1), Florida Statutes. Notice and Standing On October 3, 2003, notice of GM’s intent to permit the relocation of Foster (the Proposed Relocation) from its current location at 36822 Highway 54 West, Zephyrhills, Florida (Existing Location) to a proposed location at Interstate 75 and State Road 56 in the Wesley Chapel Area (Relocation Site) was published in the Florida Administrative Weekly, Volume 29, Number 40, page 3964. Both the Existing Location and the Relocation Site are in Pasco County, Florida. Stewart is an existing franchised Chevrolet dealer who timely protested the proposed relocation of Foster. Stewart has standing to maintain that protest. University is an existing franchised Chevrolet dealer. After Roger Whitely Chevrolet, Inc., timely protested the proposed relocation of Foster, University purchased the stock of Roger Whitley Chevrolet, Inc., and changed the name of the dealership to University Chevrolet. University acquired the rights of Roger Whitley Chevrolet, Inc., to protest the proposed relocation, and has standing to maintain that protest. The Community or Territory and Recent Modifications to the Chevrolet Dealer Network The Community or Territory (Comm/Terr) relevant to this proceeding is the area defined by GM as the Tampa Multiple Dealer Area (Tampa MDA) plus the Wesley Chapel and Plant City markets.2/ There are currently four Chevrolet dealers in the Tampa MDA: Stewart, University, Ferman Chevrolet, and Autoway Chevrolet. There are currently five Chevrolet dealers in the Comm/Terr, the four Tampa MDA dealers plus Bill Heard Chevrolet (Bill Heard) in Plant City. Foster is not currently in the Tampa MDA or the Comm/Terr. The area currently assigned to Foster as its Area of Primary Responsibility pursuant to its GM franchise agreement is referred to as a Single Dealer Area (SDA), meaning that Foster is the only dealer assigned to the APR. The Proposed Relocation would add Foster as a fifth Chevrolet dealer in the Tampa MDA and a sixth Chevrolet dealer in the Comm/Terr. The Comm/Terr currently contains four full line Ford dealerships and one light-truck only Ford dealership. All other line-makes currently have four or fewer dealers in the Comm/Terr. In 2004 there were two significant changes in the Chevrolet dealer network within the Comm/Terr. In May of 2004, Bill Heard relocated to a new facility adjacent to Interstate 4, placing Bill Heard in a better position to sell into the Tampa MDA along with the expectation of both a significant increase in Bill Heard’s new vehicle sales and Chevrolet’s level of performance in the Comm/Terr.3/ In June of 2004 University purchased Roger Whitley Chevrolet, changed managers, expanded business hours, and tripled advertising expenditures. The recent ownership change is expected to result in increased new vehicle sales from the dealership and an increased level of Chevrolet performance in the Comm/Terr.4/ Proposed Relocation In the Fall of 2002, the owner of Foster, Harry M. Foster, requested that GM grant him an additional Chevrolet location in the Wesley Chapel, Florida, area. Subsequently, GM conducted a market study to determine whether it was appropriate to add a Chevrolet location in Wesley Chapel. Marvin Beaupre was assigned the task of analyzing the Wesley Chapel market and determining whether an additional Chevrolet location was justified. Beaupre’s subsequent market study revealed that Chevrolet had historically received an adequate level of representation from existing dealers in the area currently assigned to Foster in its GM franchise agreement (the dealership’s APR). Beaupre concluded that although there appeared to be a deficiency in Chevrolet performance in the Tampa MDA, the deficiency was not significant enough to justify the addition of a new dealership in Wesley Chapel. When Foster learned of GM’s decision not to add a new Chevrolet dealership in Wesley Chapel, he requested the opportunity to relocate his existing dealership in Zephyrhills, Florida, to the Wesley Chapel area. GM agreed to allow the Proposed Relocation on the basis of growth in the Wesley Chapel and New Tampa area. Currently, Foster is located in approximately the center of its APR/SDA. The Proposed Relocation would place Foster in the furthest southwestern portion of its APR/SDA, with a location immediately adjacent to the AGSSAs assigned to Stewart and University. As a result of the Proposed Relocation and the addition of Foster to the Tampa MDA, Stewart and University would be assigned new AGSSAs considerably smaller (in both geography and population) than their existing AGSSAs. The new AGSSA that would be assigned to Foster as a result of the Proposed Relocation would be larger in terms of population and sale opportunity than its existing APR/SDA. Those portions of the current Foster APR/SDA which would not be included in the AGSSA assigned to Foster after the relocation would be reassigned to the dealership immediately to the north of Foster, Dade City Chevrolet, increasing the geography, population, and sale opportunity of the Dade City Chevrolet APR/SDA. Harry M. Foster owns both Foster and Dade City Chevrolet. Is Current Representation Adequate As a result of the Proposed Relocation, certain consumers would suffer a negative impact, although some consumers would have more convenient access to a Chevrolet dealer. Consumers in the new AGSSA that would be assigned to Foster would experience an average decrease in distance to a Chevrolet dealer of 3.7 straight-line miles.5/ Contrarily, consumers in the existing APR/SDA assigned to Foster would experience an average increase in distance to a Chevrolet dealer of 4.0 driving miles, and those same consumers would experience an average increase in distance to Foster of 6.0 driving miles. Throughout the Comm/Terr, the Proposed Relocation would only result in an average decrease in the distance from a consumer to a Chevrolet dealer of .4 straight-line miles. Other than convenience, there is a second factor arising from the Proposed Relocation that could impact consumers. There will be a greater number of consumers located between Foster and Dade City Chevrolet. Consumers previously located between Foster and Stewart or University (with easier access to cross-shop between Foster and Stewart or University) would be located between Foster and Dade City Chevrolet after the relocation with convenience lying in the cross-shop between Foster and Dade City Chevrolet. Since both Foster and Dade City Chevrolet are owned and operated by the same individual, it is possible that the Proposed Relocation could result in a decrease of competition among Chevrolet dealers as it relates to some consumers, a negative impact on those consumers and on the public interest. In terms of competition between two Chevrolet dealers, convenience to the customer is the most critical factor. The Proposed Relocation would move Foster significantly closer to both Stewart and University, and to consumers served by those dealerships. In terms of straight-line distance, the Proposed Relocation would be a move of 10.7 miles. Currently, Foster is 20 straight-line miles from Stewart and 19.6 straight-line miles from University. After the relocation, Foster would be 9.7 straight-line miles from Gordon Stewart and 10.8 straight-line miles from its old location. In terms of driving time, Foster is currently 37.7 minutes from Stewart and 33.5 minutes from University. After the relocation, Foster would be 18.4 minutes from Stewart and 14.1 minutes from University. As a result of the Proposed Relocation, Foster would be significantly closer to many consumers now closer to either Stewart or University. Additionally, Foster would be significantly closer (both in straight-line distance and drive time) to a large percentage of the existing new vehicle, used vehicle, and service customers of both Stewart and University. In 2002 and 2003, Stewart and University made 40% of the sales registered in the area to which Foster would gain a convenience advantage as a result of the Proposed Relocation. There exists a statistical correlation between the size of a dealer’s AGSSA and the number of new vehicle sales made by the dealer. As the size of a dealer’s AGSSA decreases the number of sales made by the dealer will typically decrease. In this instance, based on the relative change that would result in the increased convenience of Foster to those consumers who currently find it more convenient to shop at Stewart or University and the decrease in the area in which Stewart or University would have a competitive advantage based on convenience (i.e. a decrease in each dealer’s AGSSA), a reasonable estimate of impact to Stewart from the Proposed Relocation is a loss of approximately 17% of new vehicle sales and 15% of used vehicle sales and service business.6/ A reasonable estimate of impact to University from the Proposed Relocation is a loss of approximately 16% of new vehicle sales and 15% of used vehicle sales and service business.7/ Based on Stewart’s performance in 2003, the financial losses incurred by Stewart as a result of the Proposed Relocation would be in the range of $600,000 per year. Based on the pro forma financial statement submitted to GM by University at the time of its purchase of Roger Whitley Chevrolet, Inc., the financial losses incurred by University as a result of the Proposed Relocation would be in the range of $750,000 per year.8/ The Proposed Relocation could have a significant short-term negative impact on existing dealers, including a significant financial impact on Stewart and University. GM’s expert classified short-term as up to a year, and indicated that after that period the market could adjust and existing dealers re-establish their pre-relocation level of performance. However, that dealership growth would, at least in part, be a result of general growth in the market and does not indicate that existing dealers will regain their pre-relocation level of performance in an economic sense (because they have been denied the opportunity to capture the growth that would have resulted from general market expansion). Significantly, the financial loss expected for both Stewart and University could, because of the “turn and earn” system employed by GM to determine vehicle allocation, result in a circumstance known in the automobile industry as a “death spiral,” where the dealer cannot earn vehicles because of a slow turn rate and cannot turn vehicles because it has not earned them. As the name implies, the “death spiral” results in a dealer either going out of business or having to sell the dealership. Impact on GM GM would not significantly benefit from the Proposed Relocation. Although it is clear that there has been recent growth in the Wesley Chapel area and that other manufacturers have, or plan to, establish locations in that general area, the evidence establishes that existing Chevrolet dealers are actively pursuing sales and service business in the Wesley Chapel area (including producing a significant amount of advertising for Chevrolet products) and, as noted above, that Chevrolet currently has an adequate level of convenience to customers in Wesley Chapel. The evidence does not establish that GM will enjoy increased sales or overall increased customer convenience as a result of the Proposed Relocation.9/ Existing Chevrolet dealers have historically provided an adequate level of customer satisfaction performance and have adequate facilities to serve the Comm/Terr.10/ Short-term competition between Chevrolet dealers for customers in the Comm/Terr could increase after the Proposed Relocation. The likelihood, however, that competing Chevrolet dealers will not be as successful as they have been in the past in making sales into the Wesley Chapel area if Foster is relocated, makes it highly probable that competition among Chevrolet dealers for customers in that area will actually decrease in the long-term. Existing dealers will focus their marketing efforts on areas other than Wesley Chapel. Investment of Existing Dealers The owners of Stewart and University have invested significant dollar amounts to perform their obligations under their respective GM franchise agreements. The owners of Stewart invested approximately $9,000,000 in purchasing land and constructing facilities for the dealership. The owners of University recently purchased the stock of Roger Whitley Chevrolet, Inc., and have an investment of $12,000,000 to $14,000,000 in the dealership. The Proposed Relocation would put the investment of the owners of Stewart and University at significant risk. Market Penetration A line-make’s market penetration is measured by dividing the number of that line-make’s new vehicles registered in a particular area by the total number of competitive new vehicles registered by all line-makes in the same area. In determining whether Chevrolet is currently achieving a reasonably expected level of market penetration in the Comm/Terr a reasonable standard or benchmark must first be established against which Chevrolet’s performance is compared which is neither too high nor too low. Chevrolet’s national average market penetration as a standard against which to judge Chevrolet’s current performance in the Comm/Terr is not reasonable.11/ There are several reasons why use of the national average is not appropriate to test Chevrolet’s current market penetration in the Comm/Terr. First, the national average represents a very large area (the nation), which is demographically very diverse in terms of culture, economy, politics, climate, terrain, etc. The Comm/Terr, or for that matter the State of Florida as a whole, does not share that same level of diversity.12/ Second, most manufacturers have rejected national average as a reasonable standard for evaluating dealer performance. Indeed, GM uses state average when evaluating the performance of its Chevrolet dealers.13/ The deposition testimony of William E.L. Powell, the former Zone Manager responsible for approving network changes such the Proposed Relocation, establishes that, although national average is considered, state average is the focus of GM’s analysis of whether a particular line-make as a whole is being under represented in a market. Third, the national average includes areas that are heavily influenced by special purchasing plans provided to GM employees, those employees’ family members, and employees of GM suppliers. Those plans provide participants an incentive to purchase GM products by establishing a standard price (only slightly above dealer cost) at which the participant may purchase a vehicle from any dealer in the country. It is telling that those states in which Chevrolet’s average penetration meets or exceeds what is expected based on national average are almost exclusively found in the “heartland” of America. Those states, which are the traditional home to manufacturing in this country, are also the states in which Chevrolet’s penetration performance is most likely to be positively influenced by GM’s employee and supplier purchase plans. Use by GM of the national average as a standard to judge Chevrolet’s performance in the Comm/Terr overlooks the fact that the only Florida MDA in which Chevrolet’s market penetration meets or exceeds what is expected based on national average is Pensacola, Florida. In all of the 10 other Florida MDAs, Chevrolet falls short of the expected penetration based on national average. The markets in Florida where Chevrolet does achieve the expected level of market penetration based on national average are significantly different from the Comm/Terr which is the subject of this proceeding. They tend to be more rural in location than this Comm/Terr and significantly smaller in terms of automobile retail activity.14/ In these more rural areas, the market penetration of what are traditionally considered domestic brands, such as Chevrolet, tends to be higher than in urban areas because throughout the rural areas there is a lack of representation of what are traditionally considered import brands. The appropriate standard against which to measure Chevrolet’s performance in the Comm/Terr, when judging the performance of a line-make in a Florida market, is to use that line-make’s performance in the State of Florida as a whole as the standard. Although there exist differences in the demographic, geographic, economic, and political make-up of the various communities throughout the State, Florida as a whole is much more representative of the Comm/Terr than is the Nation as a whole.15/ Chevrolet’s performance in the Comm/Terr has historically been either above or essentially at the expected level of penetration based on Florida average. In 2001, Chevrolet performed at 102.8% of the expected level. In 2002, Chevrolet performed at 99.6% of the expected level, and, in 2003, at 99% of the expected level. In those years where Chevrolet was below the expected level, the shortfall was insignificant (32 out of 7,292 expected units in 2002, and 80 out of 7,517 units in 2003).16/ More importantly, the statistics presented regarding Chevrolet’s performance during previous years do not reflect the performance of the currently existing dealer network.17/ Rather, if a reasonable level of increased performance is attributed to Bill Heard as a result of that dealership’s relocation in May of 2004 (note 3 supra), it is unquestionable that Chevrolet does now achieve its expected level of penetration in the Comm/Terr based on Florida average. As for the AGSSA that would be assigned to Foster if it relocated, Chevrolet’s level of penetration in that market has historically been slightly under its expected penetration based on Florida average. In 2001, Chevrolet performed at 94.3% of the expected level, in 2002 Chevrolet performed at 91.1% of the expected level, and in 2003 Chevrolet performed at 91.9% of the expected level. Again, the shortfall in terms of number of retail units sold was not substantial (50 out of 883 expected in 2001; 82 out of 916 expected in 2002; and 83 out of 1,018 expected in 2003). As with the Comm/Terr, if the impact of changes in the dealer network, which occurred in 2004, are considered (notes 3 & 4 supra), the shortfall in performance within the relocated Foster AGSSA disappears or becomes statistically insignificant. Thus, under the currently existing dealer network, Chevrolet’s present penetration in the relocated Foster AGSSA does not fall significantly below the Florida average. The minimal shortfall that may exist in the relocated Foster AGSSA relates to the fact that Chevrolet products do not perform as well in higher income markets as in markets with more modest incomes. This phenomenon is a factor beyond the control of the dealers within the Comm/Terr. Because Wesley Chapel is a higher income area, Chevrolet cannot be expected to perform as well in that market as in the Comm/Terr as a whole. GM Denial Of Growth Opportunity to Existing Dealers The owners of Stewart established the dealership in 1991. The dealership was established as an additional dealership location granted by GM, and GM established the exact location of the dealership. Prior to agreeing to open the dealership, Gordon Stewart, the principal owner, expressed to GM his concern that the dealership was to be located in a sparsely populated area north of Tampa. In response to Mr. Stewart’s concerns, GM reassured him that it had conducted a market study and determined that the location they had chosen was the optimal location for the dealership based on future market growth GM reasonably expected to occur north of Tampa. Based on GM’s assurances, Mr. Stewart and his partner, Arthur Smith, made considerable investment in constructing and equipping the dealership, with what they believed to be a reasonable expectation of selling approximately 2,500 new vehicles each year. The growth, however, that GM expected north of Tampa did not materialize, except for in the Wesley Chapel area. Nor has Stewart reached its projection of 2,500 new units sold per year, achieving instead only half as many sales. Because of the number of competitive dealers located south of Stewart, the dealership has had to rely on growth in the Wesley Chapel area as the basis for a significant portion of its profits and for future growth potential of the dealership, particularly as areas immediately surrounding the dealership have begun to decline. As discussed above, the Proposed Relocation would have a significant negative financial impact on Stewart and University. Additionally, the Proposed Relocation would deny Stewart the opportunity to serve the North Tampa market, which was the original purpose for establishing the dealership. GM’s approval of the Proposed Relocation would deny Stewart the reasonable opportunity for expansion and growth of its business that GM indicated would be available when Mr. Stewart and Mr. Smith agreed to invest in the dealership. Coercion of Existing Dealers There have been no efforts by GM to coerce existing dealers to consent to the proposed relocation. Distance and Accessibility Distance and travel time, between Foster and Stewart and Foster and University would be reduced by half if the Proposed Relocation were to occur. There, however, is no indication that consumers in the Comm/Terr do not already have easy access to existing Chevrolet dealers in the Comm/Terr. At present, Chevrolet currently enjoys the second lowest average distance to consumer measurement of all the line-makes represented in the Comm/Terr. The Proposed Relocation would not add any significant improvement to the ability of customers in the Comm/Terr to access a Chevrolet dealer. Benefits to Consumers Obtained by Geographic or Demographic Changes Rather than providing benefits to consumers that are not likely to be obtained by geographic or demographic changes in the Comm/Terr, the Proposed Relocation may result in a negative impact to consumers. Protesting Dealers And Dealer Agreements Compliance Stewart and University are in compliance with the terms of their dealer agreements. Adequacy of Interbrand and Intrabrand Competition and Consumer Care The high level of market penetration being achieved by Chevrolet in the Comm/Terr and the increase in that market penetration that will occur as a result of the recent dealer network changes, indicates that there is adequate intrabrand and interbrand competition in the Comm/Terr. (notes 3 & 4 supra.) As previously noted, Chevrolet’s level of convenient consumer care is among the best in the Comm/Terr. As for existing dealership facilities, the existing Chevrolet dealers in the Comm/Terr have facilities which are adequate to service the market. Relocation Justification Based on Economic and Marketing Conditions There are no economic or marketing conditions to justify the Proposed Relocation. The recent changes in the dealer network (the Bill Heard relocation and the change of ownership at University) have made this even more emphatic. Volume of Existing Dealers Registrations and Service Business The existing Chevrolet dealers are transacting a significant level of service and sales business in the Comm/Terr. In terms of retail sales volume, in 2003 Chevrolet ranked second in passenger vehicle sales and second in light- truck sales registered within the Comm/Terr.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is RECOMMENDED: That a final order be entered determining that Petitioner, General Motors Corporation, has failed to satisfy its burden of establishing that existing Chevrolet dealers are not currently providing adequate representation to the Chevrolet line-make within the community or territory of the proposed relocation, and denying the application to relocate Foster from its current location to the proposed location at I-75 and State Road 56. DONE AND ENTERED this 16th day of February, 2005 in Tallahassee, Leon County, Florida. S DON W. DAVIS 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 16th day of February, 2005.
Findings Of Fact On November 5, 1987, a customer at Cowarts 66 service station complained of suspected water in the premium unleaded gasoline the customer had purchased at Cowarts 66 service station. Pursuant to the complaint, William Ford, an inspector for the Department, examined the premium unleaded gasoline storage facility at Cowarts 66 service station. The inspector obtained a sample of gasoline from the premium unleaded gasoline tank. The sample was examined by a Department of Agriculture chemist. There was no water found in the sample. However, the sample showed an end point of 455 degrees Fahrenheit which exceeded the maximum end point of 437 degrees Fahrenheit allowed by the Department under its rules governing petroleum products. Rule 5F-2.001(c)(4), F.A.C. The high end point was caused by the gasoline stored in the tank being mixed with or contaminated by another petroleum product with a high end point such as diesel fuel, thereby raising the end point of the premium unleaded. The contamination was caused by Clay Oil when their delivery driver accidentally mixed two fuels together and delivered the contaminated fuel to Cowarts 66. On November 6, 1987, the inspector issued a stop sale notice. The Department then has the right to confiscate the contaminated gasoline. However, the Department may elect to allow the station to post a bond in lieu of confiscation. In this case, the Department allowed Cowarts 66 to post a $1,000.00 bond in return for replacing the contaminated gasoline with gasoline meeting the Department's standards. The bond was posted the same day as the stop sale notice. The gasoline was likewise replaced either the same day or the morning after by Clay Oil. Cowarts 66 was later reimbursed by Clay Oil for the $1,000.00 cash bond. William Ford testified that he had been an inspector for Petitioner in the Jacksonville area for 16 years and had been familiar with Clay Oil Corporation and its operation for the past 10 or 15 years. He knew the corporation to be a reputable company. Prior to the instant case, he had never had any dealings with Clay Oil Corporation regarding dispensing of contaminated fuel. He had never had an occasion to require Clay Oil Corporation to post a bond. Ford, also, testified that the violation was clearly inadvertent and not representative of the normal business practices of Clay Oil Corporation. Furthermore, Ford testified that Clay Oil Corporation had been totally cooperative with the Department and had made immediate efforts to correct the violation regarding the contaminated fuel. Clay Oil Corporation's representative, Peter T. Eyrick, testified that upon being advised that contaminated fuel had been delivered to Cowarts' service station, he immediately instigated measures to replace the contaminated fuel with fuel that met Department standards. Furthermore, he testified that he had no knowledge that contaminated fuel had been delivered or that illegal sales had occurred until being informed by Cowarts' owner and the Department's inspector. The evidence clearly establishes that this violation was inadvertant and isolated. The violation is not representative of the normal business practice of Respondent. The evidence, also, clearly demonstrated that Respondent had no intent to sell adulterated fuel.
Recommendation Based upon the foregoing findings of fact and Conclusions of Law, it is RECOMMENDED that the Department refund to Clay Oil Corporation $750.00 of the $1,000.00 bond. DONE and ORDERED this 11th day of May, 1988, in Tallahassee, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of May, 1988. APPENDIX CASE NO. 88-0181 Petitioner, Clay Oil Corporation, did not number its paragraphs in its recommended order. I, therefore, have numbered the paragraphs in its recommended order sequentially and utilize those numbers in this appendix. Petitioner's proposed findings of fact contained in paragraphs 1, 2, 3, 4 and 5, have been adopted, in substance, in so far as material. Respondent's proposed findings of fact contained in paragraphs 1, 2 and 3, have been adopted, in substance, in so far as material. Respondent's proposed findings of fact contained in paragraph 4 has been adopted, in substance, in so far as material, except for the finding regarding the number of gallons sold. The number of gallons sold was not shown by the evidence. Respondent's proposed findings of fact contained in paragraph 5 was not shown by the evidence. COPIES FURNISHED: Peter T. Eyrick Clay Oil Corporation Post Office Box 8 Doctors Inlet, Florida 32030 Harry Lewis Michael, Esquire Florida Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32399-0800 Paul S. Boone, Esquire 1221 King Street Jacksonville, Florida 32204 Honorable Doyle Connor Commissioner of Agriculture The Capitol Tallahassee, Florida 32399-0810 Ben Pridgeon, Chief Bureau of Licensing & Bond Department of Agriculture Lab Complex Tallahassee, Florida 32399-1650
The Issue Whether Stella Chevrolet, Inc., should be granted a license to establish and operate a new Chevrolet dealership at 1180 South Blanding Boulevard, Orange Park, Clay County, Florida, because of inadequate representation by existing Chevrolet dealers in the relevant territory or community.
Findings Of Fact Stella filed an application with the Department for a license to establish and operate a Chevrolet dealership at 1180 South Blanding Boulevard, Orange Park, Clay County, Florida. Roberts and Nimnicht filed a letter with the Department protesting Stella's application. Stella's proposed location is within an area designated by Chevrolet as the Jacksonville multiple dealer area (hereinafter referred to as "MDA"). The Jacksonville MDA is comprised of Duval County and parts of Clay, Nassau and St. Johns Counties. The Jacksonville MDA is an appropriate starting point in determining the appropriate "community or territory" which will govern in this case. There are five Chevrolet dealerships located within the Jacksonville MDA: Nimnicht Chevrolet, Conrad Hawkins Chevrolet, Jerry Hamm Chevrolet, Steve Hull Chevrolet and Moore Chevrolet. There are seven Chevrolet dealerships located in the area which surrounds the Jacksonville MDA: Roberts Chevrolet (located in Green Cove Springs), Wilson Chevrolet (located in St. Augustine), St. Johns Chevrolet (located in Palatka), Ken Reagh Chevrolet (located in MacClenny), Wells Chevrolet (located in Starke), Gasgarth Chevrolet (located in Fernandina Beach) and Bennett Chevrolet (located in Kingsland, Georgia). The Jacksonville MDA is divided by Chevrolet into six "Areas of Geographic Sales and Service Advantage" (hereinafter referred to as "AGSSA"). AGSSA's are comprised of census tracts. If a census tract cannot be used in determining the boundaries of an AGSSA, the AGSSA's boundaries are designated by Chevrolet based upon other geographic descriptions such as zip codes, C-towns and NTC's. Five of the six AGSSA'S in the Jacksonville MDA have a Chevrolet dealership located within the AGSSA's boundaries: AGSSA Chevrolet Dealership Hull Hawkins Nimnicht Hamm Moore The Chevrolet dealerships located within the Jacksonville MDA are given a competitive advantage within the AGSSA that the dealership is located in because of the geographic location of the dealership. AGSSA 6 does not have a Chevrolet dealership located within its boundaries. Stella is proposing to operate a Chevrolet dealership within AGSSA 6. Roberts has been assigned primary responsibility by Chevrolet for servicing Clay County. When consumer buying habits, as evidenced by vehicle sales and registration locations, are considered, Roberts is the only dealer located on the fringes of the Jacksonville MDA whose market area should be considered as part of an interconnected homogeneous shopping area with the Jacksonville MDA. The area surrounding Roberts should be included as part of the relevant "community or territory" in this case. Taking into account geographic factors which are considered in defining an AGSSA, an area identified by GM as "Area 14" should be assigned to Roberts for inclusion as part of the relevant "community or territory" in this case. GM and the Chevrolet dealerships located within the Jacksonville MDA have entered into Dealer Sales and Service Agreements (hereinafter referred to as the "Dealer Agreement"). The Dealer Agreement establishes the terms of the business relationship between GM and a dealer. Among other things, a Dealer Agreement provides the following general explanation of the purpose of the Dealer Agreement: The purpose of this Agreement is to establish Dealer as an authorized dealer for Chevrolet motor vehicles, to establish the location from which Dealer will operate and to identify the individual Dealer Operator and owner(s) of Dealer on whom General Motors relies in entering into this Agreement. This is a personal service contract setting forth the rights and obligations of Dealer and its approved Dealer Operator and owner(s) and of General Motors relating to the sale and service of Chevrolet motor vehicles and related Parts and Accessories. Among other things, the Dealer Agreement establishes a method of evaluating the performance of a dealer for purposes of determining the dealer's compliance with the Dealer Agreement. The Dealer Agreements entered into with the Respondent dealers do not specifically deal with the question of what constitutes the "community or territory" for purposes of this case or provide that the Jacksonville MDA should be considered the "community or territory" in this case. Nor did the evidence presented in this case establish that the relevant "community or territory" in this case should be limited to the Jacksonville MDA. GM conducted a survey of the Jacksonville MDA. The results of the survey were issued in 1987. In the survey GM concluded that an additional dealership was needed in AGSSA 6. The geographic area of AGSSA 6 for purposes of the survey was different from the geographic area of AGSSA 6 relied upon by GM during the formal hearing of this case. The evidence failed to prove, however, that AGSSA 6 as defined by GM during the formal hearing was not a proper designation for purposes of this case. AGSSA 6 as defined during the formal hearing was proper and should be included within the relevant "community or territory." AGSSA's 1 through 6 and Area 14 constitute a single interconnected market for Chevrolets, based upon consumer buying habits. Based upon this fact and a consideration of vehicle shopping areas and road networks, AGSSA's 1 through 6 and Area 14 (hereinafter referred to as the "Territory"), constitutes the "community or territory" for purposes of the this proceeding. GM has not contended nor proved that the dealers in the Territory have not complied with the terms of their Dealership Agreements with GM. Instead, GM has contended and proved that existing dealers are not providing adequate representation in AGSSA 6. Chevrolet's market penetration in the nation as a whole is represented by national averages. Chevrolet's national averages include adequately and inadequately represented markets. National average market penetration rates are an appropriate starting point to develop a standard to determine whether Chevrolet dealers located in the Territory are providing adequate representation. The Respondents have argued that use of national average penetration rates is improper. Although it is true that Single Dealer Areas, which are included in determining national penetration rates, have a higher penetration rate than MDAs such as the Jacksonville MDA, the evidence proved that national averages are a proper standard to apply in this case. National averages include adequately and inadequately represented Single Dealer Areas and MDAs. Approximately one-half of Chevrolet's Florida markets exceeded national average penetration rates during 1987 and the first six months of 1988. National averages are therefore achievable by Florida Chevrolet markets. AGSSA 6 ranked near the bottom of all Florida markets in penetration rates for cars and trucks. The Territory also ranked in the bottom half. The market penetration rates for AGSSA 6 and the Territory during 1987 and the first six months of 1988 were below national average: AGSSA 6's rate during 1987 was only 59% of national average for cars and 77% for trucks; AGSSA 6's rate during the first six months of 1988 was only 55% of national average for cars and 75% for trucks. Any given market, including the Territory and/or AGSSA 6, can have unique characteristics which affect the buying habits of the population of the market. GM presented evidence concerning a number of these characteristics: product popularity, age and income. Product preference, age and income statistics of AGSSA 6 and the Territory are not significantly different from product popularity, age and income nationally. This supports a conclusion that national averages are an appropriate standard to apply in this case. The relative popularity of various types of vehicles in AGSSA 6 and the Territory is almost the same as popularity of the same vehicles nationally. This fact suggests that unique demographic characteristics in AGSSA 6 or the Territory do not justify or explain the difference in penetration rates for AGSSA 6 and/or the Territory compared with national averages. When the various age groups of new vehicle buyers are compared with the same age groups nationwide, there is no significant difference which explains the lower penetration rate of AGSSA 6 and/or the Territory. This supports a conclusion that national averages are an appropriate standard to apply in this case. A comparison of the income of residents of AGSSA 6 and the Territory with incomes nationwide also supports a conclusion that national averages are an appropriate standard to apply in this case. Various parts of the Territory have equaled or exceeded national penetration rates, supporting application of national averages as the appropriate standard. AGSSA 6 has ranked last in the Territory since 1985. AGSSA 6's averages have been below the national averages, Florida averages and the Territory's averages. A significant difference between AGSSA 6 and the rest of the Territory is the difference in the distances which residents of AGSSA 6 have to travel to a Chevrolet dealership compared to the distances other residents of the Territory must travel. AGSSA 6 residents must travel, on average, almost twice as far. When AGSSA 6's performance is compared with national averages, AGSSA 6's efficiency from 1985 through the first six months of 1988 was only 65 to 70%. Increases in truck penetration during 1987 and the first six months of 1988 were offset by decreases in car penetration. If fleet opportunities, expected penetration, Florida averages, or Territory averages are taken into account the same lack of efficiency is evidenced in AGSSA 6. The population in the Territory has steadily increased since 1970. Households have nearly doubled. In AGSSA 6 households have increased four times. The density of the registration of vehicles generally follows the density of population and households. Between 1982 and 1987, new vehicle registrations have increased 74% in the Territory and 84% in AGSSA 6. During 1988 household income in the Territory generally exceeded $15,000.00. AGSSA 5, an AGSSA with a Chevrolet dealership, had the highest household income of $38,844.00. AGSSA 5 also had the highest penetration rate for Chevrolet. AGSSA 2 was the lowest AGSSA with a Chevrolet dealership with household income of $24,237.00. AGSSA 2 still had the second highest penetration rate for Chevrolet. AGSSA 6, without a Chevrolet dealership, had household income of $39,874.00. Despite its high household income, AGSSA 6 had the lowest Chevrolet penetration rate. Since 1980, the employment rate for an area roughly equivalent to the Territory increased 42%. The employment rate for an area roughly equivalent to AGSSA 6 increased 69%. The increases in population, households and employment in AGSSA 6 represent greater opportunity for vehicle sales. Despite this growth in AGSSA 6 and the population, household and employment increases in the Territory, the number of Chevrolet dealerships in the Territory has remained the same since 1960: six (five in the Jacksonville MDA). When all Florida markets are looked at, the number of markets in which Chevrolet has exceeded national averages has decreased if industry registrations as a whole increased above 6,000 retail industry registrations per dealer. In markets between 1,500 and 6,000 retail industry registrations per dealer, Chevrolet registrations are slightly above national average. Using 6,000 retail registrations as a guideline supports a conclusion that there is need for an additional Chevrolet dealership in the Territory. Looking at just AGSSA 3 and 6 and Area 14 supports the same finding. Competition in the Territory is extremely high. Chevrolet dealers in the Jacksonville MDA maintain one of the largest advertising budgets of any group of Chevrolet dealers. The boundaries of the AGSSA's within the Territory do not prevent the existing dealers from selling Chevrolets to residents of other AGSSA's or even from outside the Territory. The distance of residences from a dealership, however, does affect the ability of a dealer to effectively penetrate those residences. The distances from existing dealerships to the proposed new Chevrolet dealership in AGSSA 6 range from ten miles to over twenty miles. These distances adversely affect Chevrolet's ability to penetrate AGSSA 6. Locating a new Chevrolet dealership in AGSSA 6 would significantly improve the convenience in AGSSA 6 for Chevrolet over competing brands and improve its market share. AGSSA 6 is an identifiable plot. AGSSA 6 is not receiving adequate representation by existing dealers. GM presented evidence of four markets in Florida where the introduction of a new dealership was followed by an increase in Chevrolet penetration rates: Crystal River, Eustis, West Palm Beach and Hudson. The introduction of a new Chevrolet dealership into AGSSA 6 should increase Chevrolet's penetration rate in AGSSA 6. There are sufficient lost sales opportunities in AGSSA 6 to warrant an additional Chevrolet dealership. The Respondents unsuccessfully attempted to prove that there was no lost opportunity. The Respondents' evidence failed to take into account truck lost opportunities. The Respondents presented evidence in an effort to prove that Chevrolet performs well in areas where the population has certain characteristics and that AGSSA 6's population does not have those characteristics. The Respondents conclude from their analysis that Chevrolet sales in AGSSA 6 are as high as can be expected because of the characteristics of the residents of AGSSA 6. The Respondents' position is rejected. The Respondents identified an area as AGSSA 6 which was different from the area designated as AGSSA 6 for this proceeding. The Respondents also assumed that Stella would be located at a site different from the site it is proposing. The Respondents presented evidence concerning efforts by other Chevrolet dealerships to relocate within the Jacksonville MDA. Whether there are better methods of improving Chevrolet's performance in AGSSA 6 is not at issue in this proceeding. The only issue is whether existing Chevrolet dealerships are providing adequate representation in the Territory for Chevrolet. The Respondents also presented evidence in an effort to prove that Stella was selected to provide the new dealership because of Mr. Stella's relationship with officials at Chevrolet. The Respondents' continued arguments concerning this point ignore the evidence in this case and are rejected.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be issued approving the application of Stella to establish a new Chevrolet dealership at 1180 South Blanding Boulevard, Orange Park, Clay County, Florida. DONE and ENTERED this 30th day of January, 1990, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of January, 1990. APPENDIX TO RECOMMENDED ORDER GM and Roberts and Nimnicht have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. GM's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 3-7. 2 12. 3 8-9 and 13. 4 19. 5 22. 6 23. 7 24. 8 25. 9 Hereby accepted. 10-11 26. 12 27. 13 29-30. 14 See 44. 15 29. 16 29-30. 17 See 31. 18-19 32. 20 33. 21 34. 22 35. 23 See 36-37. 24 See 39. 25 See 38-40. 26-27 See 44. Not supported by the weight of the evidence. See 43. Hereby accepted. See 44. 32 See 14-17. 33 45. See 18. 34 Hereby accepted. 35 See 21. 36-43 Hereby generally accepted. Dr. Matthews' analysis was not persuasive. 44 45. 45 Statement of a witnesses position or not supported by the weight of the evidence. 46 See 18 and 45. 47-48 Hereby accepted. 49-50 Summary of testimony and argument. 51-54 Although partially true, the issue in this case is not whether there is a better way for GM to achieve greater representation through the existing dealers. These proposed findings of fact are not relevant to the issue in this proceeding. Roberts' and Nimnicht's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-2 No proposed findings of fact were identified as paragraphs 1 or 2. 3 See 14-17. The last sentence is not relevant to this proceeding. 4 4. 5 See 14-17. The last sentence is not relevant to this proceeding. 6 18. 7-8 Not relevant. 9-10 Not supported by the weight of the evidence. 11 Although the second sentence is correct, the weight of the evidence does not support this proposed finding of fact. 12-17 Although there are portions of Dr. Ostlund's and Dr. Matthews' testimony that was acceptable, the overall finding of facts which the Respondent's argue Dr. Ostlund's and Dr. Matthews' testimony proved are rejected in favor of Mr. Anderson's testimony. 18-20 Not supported by the weight of the evidence. Although generally true, Chevrolet's penetration in the Territory and AGSSA 6 is still below national averages. Although generally true, this proposed finding of fact does not prove the ultimate facts it is suggested it proves. Not supported by the weight of the evidence. The first sentence is accepted. The last sentence is not supported by the weight of the evidence. 25 38. 26 6-7. 27 Hereby accepted. 28-29 Not relevant to this proceeding. 30 See 38. The last two sentences are not relevant. 31-33 Although generally true, not relevant to this proceeding. 34-35 Not supported by the weight of the evidence. 36-38 Not supported by the weight of the evidence. Not relevant. Not relevant or supported by the weight of the evidence. 41-42 Not supported by the weight of the evidence. 43-44 Although generally true, the conclusion reached by the Respondents is not supported by the weight of the evidence. 45-48 Not supported by the weight of the evidence. 49--50 Although partially true, the conclusion reached by the Respondents is not supported by the weight of the evidence. 51 Although GM did make such an argument, it was not a "fallback position." Nor was the argument "unavailing." 52-53 Not supported by the weight of the evidence. See 21. 54 Not relevant or not supported by the weight of the evidence. 55-59 See 21. Not supported by the weight of the evidence. Summary of GM position or not supported by the weight of the evidence. Does not prove the position advanced by the Respondents based upon the weight of the evidence. 62-68 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. 69 Hereby accepted. 70-71 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. 72-73 Not supported by the weight of the evidence. 74-78 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. 79 Not supported by the weight of the evidence. 80-89 The conclusions reached by the Respondents based upon regression analysis were not supported by the weight of the evidence. 90-101 Although these proposed findings of fact may be generally true, the issue in this case is not whether there is a better way for GM to achieve greater representation through the existing dealers. These proposed findings of fact are not relevant to the issue in this proceeding. 102 Not supported by the weight of the evidence. 103-113 Not supported by the weight of the evidence. Although parts of these findings of fact were proved, the conclusion that the Respondents' argue should be reached ignores the reality of the evidence presented. 114-116 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. COPIES FURNISHED: Charles J. Brantley, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Room B-439, Neil Kirkman Building Tallahassee, Florida 32399-0500 William Kelley, Esquire David Brown, Esquire 55 East Monroe Street Suite 4620 Chicago, Illinois 60603 Dean Bunch, Esquire 101 North Monroe Street Suite 900 Tallahassee, Florida 32301 Edward W. Risko, Esquire Office of General Counsel General Motors Corporation New Center One Building 3031 West Grand Boulevard Detroit, Michigan 48232 Stephen J. Calvacca, Esquire Vasilis C. Katsafans, Esquire Post Office Box 1873 Orlando, Florida 32802 Louis H. Anders, Jr., Esquire D. Frank Davis, Esquire Joseph W. Letzer, Esquire Robert H. Rutherford, Esquire Burr & Forman 3000 Southtrust Tower Birmingham, Alabama 35203 Michael J. Alderman, Esquire Office of General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500 Dealer License Section Room A310 Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
Findings Of Fact Since 1984, the Department has been the state agency charged with the responsibility to establish rules and regulate underground pollutant storage facilities in Florida. In 1988, the Legislature added the administration of the newly enacted Florida Petroleum Liability and Restoration Program to the Department's duties. The program was to be established on or before January 1, 1989. The Applicant is the owner of a petroleum storage system in Jacksonville, Florida. Since 1984, it has been subject to the rules regarding underground pollutant storage facilities promulgated by the Department. On September 18, 1989, an odor indicative of possible petroleum contamination was discovered at the site during the installation of monitoring wells. A Discharge Notification Form was sent to the Department by the Applicant on October 23, 1989. The form advised that there were no leaks in the system. It was suggested that the odor may have resulted from surface spill at the site over a number of years. In response to the notification, an inspection of the site was completed by the Department on December 5, 1989. The inspection revealed the following on-site violations: Registration requirements were not being met. The forms had not been updated to include the presence of monitoring wells and overfill protection at the facility. Two underground tanks had not been properly abandoned. Inventory and reconciliation records had not been properly maintained, as required by rule since 1987. This violation was reviewed, and discussed in detail with on-site representatives of the Applicant. The monitoring wells were not installed by the time deadlines set forth in the Department's rules regarding stationary tanks. Since the wells were installed in September 1989, samples had not been taken for visual signs of petroleum contamination. The purpose of the system is to allow the owner of the storage tanks to learn if there is a leak in the tanks that can be quickly controlled to limit contamination. The day after the inspection, the Applicant applied for a determination of eligibility for participation in the restoration coverage portion of the new Florida Petroleum Liability Insurance and Liability Program. An affidavit was signed stating that all of the Department's rules regarding stationary tanks were being complied with by the Applicant. Six days after the inspection, the Department sent the Applicant written notice of the results of the inspection. The Applicant was given time frames and instructions for correcting the listed violations that could be corrected. A contamination assessment and clean up were also required in the letter. This letter did not address the issue of eligibility for the restoration funding program because that was a matter unrelated to the inspection results. On March 7, 1990, the Department determined the facility was ineligible for participation in the restoration funding provided by the Florida Petroleum Liability and Coverage Program. The following reasons were given: Failure to properly abandon underground storage tanks, pursuant to Section 17-61.050(3)(c), Florida Administrative Code. Failure to maintain inventory records, reconciliations, and significant loss/gain investigation as per Section 17-61.050(4)(c), Florida Administrative Code. Failure to install monitoring system and overfill protection by the dates set forth in Section 17-61.06(2)(c)2, Florida Administrative Code. Failure to properly monitor leak detection system, pursuant to Section 17-61.050(5)(c), Florida Administrative Code. The 10,000 gallon fuel oil tank and the 3,000 gallon waste oil tank present at the facility were abandoned in March 1990. The notice issued by the Department after its inspection in December 1989, gave the Applicant sixty days after receipt of the notice to properly abandon the tanks. The Applicant substantially complied with this requirement after the written notice was received. Although the Applicant failed to maintain the inventory records, reconciliations, and significant loss/gain investigations required by the Department rules, some of these violations had been corrected prior to the Department's inspection in December 1989. Correct inventory recordkeeping was discussed during the inspection, and the need to immediately implement the proper recordkeeping practices was emphasized in the post-inspection notice of violations. All of the recordkeeping violations were not cured until August 1990. The records kept by the Applicant during the noncompliance period from 1984 to August 1990, did not provide a substantially equivalent degree of information regarding possible leak detection or prohibited discharges as the required recordkeeping procedures. Two underground stationary storage tanks on the site have been part of the Applicant's petroleum storage system since 1970 and 1975, respectively. The monitoring wells and overfill protection for these tanks should have been in place by December 31, 1987. Neither monitoring system was installed until September 1989. The Applicant began the contract negotiations for installation in September 1988. The Applicant did not demonstrate that the facility contained an alternative procedure between December 31, 1987 and September 1989, that provided a substantially equivalent degree of protection for the lands, surface waters, or groundwaters of the state as the established requirement for monitoring wells and overfill protection. In December 1989, the Department's notice advised the Applicant that the monitoring wells should be sampled monthly for visual signs of petroleum contamination. Since April 1990, the Applicant has been completing the monthly sampling in the monitoring wells as part of its leak detection system, as required by the Department's rule regarding underground stationary tanks.
Recommendation Accordingly, it is RECOMMENDED: That the Department enter a Final Order denying Petitioner's application for restoration coverage in the Florida Petroleum Liability and Restoration Program at the Jacksonville location. DONE and ENTERED this 28 day of December, 1990, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this _28_ day of December, 1990. APPENDIX TO RECOMMENDED ORDER The proposed findings of fact submitted by Petitioner are addressed as follows: Rejected. Improper interpretation of law. As for the facts in the first sentence, they are accepted. See HO #8. Rejected. Irrelevant. See HO #9. Rejected. Contrary to fact. See HO #9 and #11. Rejected. Contract to fact. See HO #11. Rejected. Contrary to fact. See HO #12 and #13. Rejected. Contrary to fact. Improper shifting of duty ad legal responsibility. Rejected . Improper application of law. The Respondent's proposed findings of fact are addressed as follows: Accepted. Accepted. Accepted. Accepted. See HO #8. Accepted. See HO #8. Accepted. See HO #3. Accepted. See HO #3. Accepted. See HO #3. Accepted. See HO #5. Accepted. Accepted. See HO #4. Accepted. See HO #4. Accepted. Accepted. See HO #6. Accepted. See HO #4 and #6. Accepted. See HO #4 and #6. Accepted. Accepted. Accepted. See HO #4 and #9. Accepted. Accepted. See HO #4 and #9. Accepted. Accepted. See HO #9. Accepted. See HO #4 and #10. Accepted. Rejected. Contrary to fact. See HO #10. Accepted. Accepted. Accepted. See HO #10. Accepted. See HO #3 and #12. Accepted. Accepted. See HO #13. Accepted. Accepted. See HO #6. Accepted. See HO #4 and #6. Accepted. See HO #6. Accepted. Rejected. Not established by evidence. See HO #6. Accepted. Accepted. Accepted. Accepted. See HO #7. Accepted. Accepted. COPIES FURNISHED: William Chadeayne, Qualified Representative 8933 Western Way, Suite 16 Jacksonville, Florida 32256 Janet E. Bowman, Esquire Assistant General Counsel Department of Environmental Regulation 2600 Blairstone Road Tallahassee, Florida 32399-2400 Dale H. Twachtmann, Secretary Department of Environmental Regulation 2600 Blairstone Road Tallahassee, Florida 32399-2400 Daniel H. Thompson, Esquire General Counsel Department of Environmental Regulation 2600 Blairstone Road Tallahassee, Florida 32399-2400
Findings Of Fact On August 6, 1981, an inspector employed by the Petitioner Department of Agriculture and Consumer Services took gasoline samples from "super lead free" and "lead free" pumps Identified as "Ben 2096" and "Ben 1693", respectively, at Barnett's Texaco Station, in Fort Meade, Florida. The samples were tested for suspicious substances and it was found that the "super lead free" had an octane level of 87.8. The sample from the "lead free" pump contained an octane level of 91.5. Based upon this information, the chemist noted that the "super lead free" and "lead free" gasolines were probably placed in the wrong pumps at the station. The "super lead free" sample was legal as "lead free" and the "lead free" sample had an octane which would qualify it as "super lead free." As a result of the test results, a stop-sale notice was issued by the Department against the "super lead free" pump. Since approximately 350 gallons of "lead free" regular was sold as "super unleaded", an assessment was made by the Department equal to retail value of the product sold to retail customers. Upon investigation, it was determined that the "super lead free" and "lead free" gasolines were not placed in the wrong pumps but rather an employee of Barnett's Texaco inadvertently placed the wrong panel indicator on the two adjacent pumps during a price change. The problem was quickly resolved and special precautionary procedures have been instituted to prevent this error from happening in the future. These procedures include a double check by different personnel each time a price change requires removal of panels. Additionally, Smith Brothers Oil Co., Inc., will double check the dealer to insure this procedure is followed. The facts set forth above are not in dispute. The only dispute between the parties 15 whether under the facts of this case the Respondent Smith Brothers Oil Co. Inc. will entitled to a return of all or part of its $490.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That the Department enter a Final Order returning $245 to the Respondent. DONE and ORDERED this 14th day of April, 1982, in Tallahassee, Florida. SHARYN L. SMITH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of April, 1982 COPIES FURNISHED: Robert A. Chastain, Esquire Doyle Conner, Commissioner General Counsel Department of Agriculture Department of Agriculture and Consumer Services and Consumer Services The Capitol Mayo Building, Room 513 Tallahassee, Florida 32301 Tallahassee, Florida 32301 Wallace W. Storey, Esquire 160 South Broadway Bartow, Florida 33830
The Issue Whether the Department of Revenue's denial of Petitioner's application for a Florida fuel license should be upheld.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: On or about May 22, 2001, Armando Yzaguirre submitted to the Department a completed Florida Fuel Tax Application, Form DR-156, seeking licensure as a private carrier and wholesaler on behalf of Yzaguirre Oil Company, Inc. ("Yzaguirre Oil"). The application listed Mr. Yzaguirre as the president and sole stockholder of Yzaguirre Oil. Form DR-156 requests information about the applicant business and its principals, including a list of 33 questions requiring a "yes" or "no" answer from the applicant. Question number 33 asks: Have you or other owners, officers, directors, or stockholders with a controlling interest, been convicted of, or entered a plea of guilty or nolo contendere to, a felony committed against the laws of any state or the United States? Mr. Yzaguirre's sworn answer to Question number 33 was "yes." Mr. Yzaguirre provided the Department with no elucidation as to the circumstances of his admitted felony conviction. On or about June 22, 2001, Maria Yzaguirre, the wife of Armando Yzaguirre, submitted to the Department a completed Florida Fuel Tax Application, Form DR-156, seeking licensure as a private carrier and wholesaler on behalf of My Oil Company, Inc. ("My Oil"). The application listed Mrs. Yzaguirre as the president and sole stockholder of My Oil. On June 29, 2001, Mrs. Yzaguirre filed with the Department articles of incorporation for My Oil. On July 5, 2001, Mrs. Yzaguirre filed these articles of incorporation with the Secretary of State to obtain registration as a Florida domiciled corporation. Aaron Hood, a revenue specialist in the Department's motor fuel registration unit, was assigned to process both the Yzaguirre Oil application and the My Oil application. Mr. Hood conducted a standard background investigation of both applicants, securing investigative reports from the Federal Bureau of Investigation and the Florida Department of Law Enforcement on the criminal histories of Armando and Maria Yzaguirre. The reports revealed that Maria Yzaguirre had no criminal record, either of arrest or conviction. The reports revealed a lengthy list of arrests for Armando Yzaguirre. The reports included a 1980 arrest for felony arson of a structure in Collier County, and a 1990 arrest and conviction for marijuana possession in Texas. The reports were inconclusive as to whether the Collier County felony charge resulted in conviction, or whether the Texas conviction was a felony. Having difficulty determining the precise nature of the felony to which Mr. Yzaguirre admitted in his application, Mr. Hood enlisted the aid of Pete Welch, a Department investigator. On January 3, 2002, Mr. Welch reported to Mr. Hood that information received from the Clerk of the Circuit Court of Collier County confirmed that Mr. Yzaguirre had been convicted by a jury of the 1980 felony charge. However, aside from Mr. Welch's e-mail report to Mr. Hood, the Department offered no evidence confirming this felony conviction. Mr. Welch's investigation also obtained details of the Texas marijuana possession charge. In December 1990, Mr. Yzaguirre's plea of nolo contendere to a second-degree felony charge of possession of more than five but not more than 50 pounds of marijuana was accepted by the court. Mr. Yzaguirre's ten-year sentence was suspended in favor of eight years' probation and a $5,000 fine. No evidence was presented to show that Mr. Yzaguirre failed to comply with the terms of probation. Neither was evidence presented that Mr. Yzaguirre has been pardoned or that his civil rights have been restored. At the hearing, Mr. Yzaguirre indicated that he is taking steps to seek restoration of his civil rights. In his review of the Yzaguirre Oil and My Oil applications, Mr. Hood discovered that the companies claimed many of the same assets. Each company listed the same two tanker trucks to be used in transporting fuel. Each company listed 211 New Market Road, East, in Immolakee as its principal business address. Each company claimed exactly $1 million in accounts receivable. The timing of the filings and the common assets led Mr. Hood to suspect that the later My Oil application was submitted under Maria Yzaguirre's name to evade the possible disqualification of the Yzaguirre Oil application because of Mr. Yzaguirre's felony convictions. In short, Mr. Hood suspected that My Oil was a "front" corporation over which Mr. Yzaguirre would exercise control. The common assets also led Mr. Hood to suspect the truthfulness and accuracy of the financial affidavits filed by Maria Yzaguirre on behalf of My Oil. While it investigated the criminal history of Mr. Yzaguirre, the Department also investigated the extent of Mr. Yzaguirre's possible control over My Oil's business activities. Armando B. Yzaguirre is the 25-year-old son of Armando Yzaguirre and the stepson of Maria Yzaguirre. Testimony at the hearing established that Armando B. Yzaguirre completed both license applications and was the driving force behind the creation of both Yzaguirre Oil and My Oil. The elder Armando Yzaguirre's chief business is farming. His tomato and melon operation earns over $1 million per year. To save money on transporting the large amounts of fuel needed for his farming operations, Mr. Yzaguirre purchased two sizable tanker trucks in 2001, a new Peterbilt with a capacity of 9,200 gallons, and a 1998 Ford with a 2,500 gallon capacity. If these trucks were used only for Mr. Yzaguirre's farm, they would sit idle much of the time. This idle capacity gave Armando B. Yzaguirre the idea of going into the fuel transport business, using his father's tankers to deliver fuel to other farms and businesses in the area. Yzaguirre Oil was incorporated to operate as a fuel transport business. The business would be operated entirely by Armando B. Yzaguirre, who was the only member of the family licensed to drive the large tanker truck. The trucks were owned by and licensed to Yzaguirre Oil. Armando B. Yzaguirre was going through a divorce at the time Yzaguirre Oil was established. He was concerned that his wife would have a claim to half of any business he owned, and wished to ensure that ownership of Yzaguirre Oil would remain in his family. Thus, Armando B. Yzaguirre placed all ownership of Yzaguirre Oil in the name of his father, though his father would have no connection with the operation of the company's business. Subsequent to incorporating Yzaguirre Oil, Armando B. Yzaguirre discussed his prospective business with his stepmother, Maria Yzaguirre. Mrs. Yzaguirre was pleased that young Armando was establishing a business for himself. They discussed the future of the six younger Yzaguirre children and ideas for businesses that could be established to eventually be taken over by the children. Ultimately, the younger Armando and Maria Yzaguirre settled on the idea of a convenience store and filling station that could be established on part of a city block in Immolakee that the senior Mr. Yzaguirre already owned. This would be the type of business that the children could learn and work at while they were still in school, then take over after their graduation. This was the genesis of My Oil. Mrs. Yzaguirre contacted a lawyer to draft articles of incorporation and later transferred $100,000 from her personal money market account into a My Oil bank account to provide start-up money. The younger Armando Yzaguirre filled out the fuel license application, using his earlier application for Yzaguirre Oil as a model. As with the earlier application, the younger Armando Yzaguirre kept his name off the corporate documents and the fuel license application to avoid any claim by his soon-to- be ex-wife to the company's assets. He anticipated that My Oil would lease the two tanker trucks from Yzaguirre Oil, and thus listed them on the application as assets of My Oil. At the hearing, Mr. Yzaguirre conceded that he made mistakes on both applications. As noted above, he listed $1 million in accounts receivable for each of the companies. These were actually accounts receivable for his father’s farming operation, and should not have been included as assets for either Yzaguirre Oil or My Oil. Testimony from witnesses for both parties indicated that communications between the Yzaguirres and the Department were poor during the application review process. The Yzaguirres often telephoned Mr. Hood to learn the status of their applications, so often that Mr. Hood felt harassed. From their standpoint, the Yzaguirres could not understand why the applications were taking months to process, and felt that Mr. Hood was continually placing obstacles in their path and avoiding their queries. As noted above, early in the review process, the Department began to suspect that My Oil was a front for Yzaguirre Oil. At the hearing, however, the Department was unable to establish that the Yzaguirres knew of the likely rejection of the Yzaguirre Oil application in the month before they filed the My Oil application. Due to illness, Mr. Hood was unable to testify at the hearing as to his conversations with the Yzaguirres. For their part, the Yzaguirres adamantly denied any prior knowledge that the elder Mr. Yzaguirre’s criminal record would disqualify his application. Armando B. Yzaguirre, who was the Yzaguirres' point person in dealing with the Department, testified that no one at the Department made him aware that his father's criminal history was a problem until December 2001. The Yzaguirres also denied that the elder Mr. Yzaguirre would have any connection with the operation of My Oil. The Department pointed to several alleged discrepancies in the My Oil application as grounds for its suspicion that the company was a "front" for Yzaguirre Oil. First, the My Oil application, filed June 20, 2001, lists a corporate asset of $100,000 in cash on deposit at an unnamed bank, when in fact the cash was not deposited in a My Oil account at Florida Community Bank until September 10, 2001. Second, the My Oil application lists the two tanker trucks as corporate assets as of the date of application, when in fact the trucks were titled in the name of Yzaguirre Oil and the anticipated lease arrangement had yet to be consummated. Third, the My Oil application claimed the property at 211 New Market Road, East, as a corporate asset as of the date of application, when in fact the property was titled in the name of the elder Mr. Yzaguirre. Fourth, the My Oil application listed $1 million in accounts receivable as a corporate asset. As noted above, Armando B. Yzaguirre admitted at the hearing that these receivables were from his father's farming operation and should not have been listed on the application as assets of My Oil. Armando B. Yzaguirre plausibly explained that My Oil anticipated leasing the trucks, but that there was no reason to spend the money to finalize that arrangement until the fuel license was obtained and My Oil could actually commence operations. Similarly, Mrs. Yzaguirre clearly had on hand the $100,000 in cash claimed as a My Oil asset, and the timing of her actual transfer of that money into a My Oil account would not alone constitute cause for suspicion, given that My Oil had yet to commence operations when the application was filed. Armando B. Yzaguirre also convincingly explained that leasing the tanker trucks from his father's company would not give Yzaguirre Oil effective control over My Oil's business. The younger Mr. Yzaguirre contemplated that the lease agreement would be an arms-length arrangement between the two companies. If the companies could not arrive at a mutually satisfactory lease agreement, or if the lease agreement should later fall through, My Oil could lease trucks from another company and continue doing business. However, no witness for My Oil offered a satisfactory explanation as to how the elder Mr. Yzaguirre's ownership of the real property would not give him some degree of control over My Oil's business. At the time of the hearing, title to the property at 211 New Market Road, East, was in the name of Armando Yzaguirre. A warranty deed for at least a portion of the property, executed by the prior owners on July 16, 1998, was in the name of Armando Yzaguirre. The Yzaguirres did not explain whether My Oil would purchase or lease the property from the elder Mr. Yzaguirre. The structure of the arrangement is critical to the issue of the elder Mr. Yzaguirre's control over My Oil. Substitutes for the tanker trucks could be obtained in short order with little or no disruption of My Oil's business. However, the physical location of the convenience store and filling station could not be changed so readily, and the elder Mr. Yzaguirre's position as owner of that property could give him great leverage over the operation of the business. The Department also raised the issue of the undisclosed participation of Armando B. Yzaguirre in the business affairs of My Oil. The testimony of Maria Yzaguirre and of her stepson strongly indicated that the younger Mr. Yzaguirre would have substantial control over the business activities of My Oil. However, because Armando B. Yzaguirre's identity was not disclosed on My Oil's application, the Department had no opportunity to conduct a review of his background and character to determine whether he met the standard set by Section 206.026, Florida Statutes. In summary, there was no direct evidence that the Yzaguirres deliberately attempted to deceive the Department or that My Oil was established as a front to obtain licensure for the presumptively ineligible Yzaguirre Oil. The evidence did establish that Armando Yzaguirre has been convicted of at least one felony, and that his ownership of the real property on which My Oil would conduct business could provide him with control of My Oil's business activities. The evidence further established that Armando B. Yzaguirre will have control over My Oil's business, and that the Department should have had the opportunity to conduct a background review to determine his fitness under Section 206.026, Florida Statutes. In conclusion, the facts established at the hearing support the Department's denial of My Oil's application as filed, but also establish that such denial should be without prejudice to My Oil's ability to file a subsequent application curing the defects of its initial application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying the application of My Oil Company, Inc. for a Florida fuel license, without prejudice to the ability of My Oil Company, Inc., to file a new application curing the defects addressed in this Recommended Order. DONE AND ENTERED this 3rd day of July, 2002, in Tallahassee, Leon County, Florida. LAWRENCE P. STEVENSON 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 3rd day of July, 2002. COPIES FURNISHED: E. Raymond Shope, II, Esquire 1404 Goodlette Road, North Naples, Florida 34102 Robert F. Langford, Jr., Esquire Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Petitioners, Chevrolet Motor Division, General Motors Corporation (Chevrolet), and Bill Heard Chevrolet Corp.-Orlando d/b/a Bill Heard Chevrolet (Bill Heard), propose to relocate Bill Heard from its current location at 3455 Orlando Drive, Sanford, Seminole County, Florida, to a site at State Road 46 at Oregon Avenue and I-4, in Sanford, Seminole County, Florida. Respondent, Fred Bondesen Chevrolet, Oldsomobile, Cadillac, Inc., (Fred Bondesen), whose address is 2800 South Highway 17-92, Deland, Florida, is protesting the proposed relocation pursuant to the provisions of Section 320.642, Florida Statutes. For the relocation to be approved under Section 320.642, Florida Statutes, the Petitioners must demonstrate that existing franchise dealers who register new motor vehicle retail sales or leases of the same line-make in the community or territory of the proposed dealership are not providing adequate representation of such line-make motor vehicles in such community or territory. Adequate representation is the basic issue in the proceeding. Other issues are derived from the considerations listed in Section 320.642, Florida Statutes, including impact of the proposed relocation on the protesting dealer, Fred Bondesen.
Findings Of Fact Stipulated Background Chevrolet is a distributor and licensee as defined by Section 320.60(5) and (8), Florida Statutes. Fred Bondesen and Bill Heard are motor vehicle dealers as defined by Section 320.60(11), Florida Statutes, and are existing franchised Chevrolet dealers. Chevrolet proposed to relocate Bill Heard from its current location at 3455 Orlando Drive, Sanford, Seminole County, Florida, to State Road 46 at Oregon Avenue and the I-4 interchange, Sanford, Seminole County, Florida. The distance of the relocation is approximately five miles to the northwest of Heard's current location. Fred Bondesen's protest of this relocation is governed by the provisions of Section 320.642, Florida Statutes, and he has standing to maintain this protest, as the proposed relocation is within 12.5 miles of his location. Bill Heard Mr. Heard inherited his father's Columbus, Georgia, Chevrolet dealership which, in 1958, was doing about $3 million in business. Mr. Heard now owns Bill Heard Enterprises, with 9 Chevrolet dealerships throughout the south and approximately $200 million in business annually. Bill Heard Enterprises is the largest Chevrolet dealer in the country. Mr. Heard's Chevrolet dealerships sold about 27,000 new retail cars and trucks in 1997. Although Bill Heard also continues to own Cadillac and Oldsmobile dealerships in Columbus, he specializes in Chevrolet and he considers that he is able to do a better job marketing Chevrolets to the public through that specialization. Where his facilities are appropriately located he has had no trouble competing with Ford or Toyota. Bill Heard purchased what was formerly Rummel Chevrolet in Sanford, Florida, in May or June of 1997. At the time he purchased the dealership, Heard did not have an arrangement with General Motors that would allow him to relocate the dealership. Heard did not request permission to relocate the dealership until after he had purchased it. Chevrolet has no investment in the relocation; Heard is paying for both the land and the buildings at the relocation site. The current facility on US 17-92 in Sanford has material physical deficiencies and, in Bill Heard's words, has the appearance of an oyster house rather than a car dealership. The current facility has only 2,000 square feet in the sales facility, and only 9 service bays. The current facility has no body shop. The current facility is at the end of an auto row with only Ford and a Cadillac/Oldsmobile dealership in sight. The Ford dealership will be moving in the near future to I-4, one exit south of the proposed Heard location. The next closest dealership is a Chrysler/Plymouth/Jeep store which is over a mile away from Bill Heard and not within sight. There is an abandoned drive-in movie theater between it and Heard's current location. The remainder of the auto row, beginning with the Chrysler/Plymouth/Jeep dealership, and going south from there another 6-7 miles, is on a congested street, with stop lights, decayed and abandoned buildings, and deteriorating retail environment. Coming from Orlando, a customer would have to drive a congested highway past virtually every other line make of dealership to get to Heard's current location. To Bill Heard, an experienced successful automobile entrepreneur, it does not make economic sense to spend many millions of dollars to build a first class facility, such as the one which is proposed, at the current location. Prior to Heard's purchase of Ken Rummel Chevrolet, the dealership was selling approximately 20 new units per month. Through aggressive marketing and advertising, Heard has been able to increase sales to over 100 a month, but they cannot be increased much more at the current location. Heard already spends approximately 1.2 million dollars a year on advertising. The proposed location is one exit north of the Ford relocation site at I-4 and State Road 46A, and directly across the street from Auto Nation. Both of these operations will bring exposure to Heard by people shopping for new Fords and other types of cars. Also on I-4, beginning in the southeast corner of State Road 46, running south almost to the proposed Ford location at State Road 46, is a major regional mall, Seminole Town Center. The mall location has made this intersection the retail center of Sanford. The proposed location of Bill Heard Chevrolet will draw considerable exposure from the mall, and its proximity to the mall will afford it visibility to the entire Orlando market. Customers coming north from Orlando will use the same route to get to the dealership that they used to get to the mall. In addition, customers will be able to leave their cars at Heard to be serviced while shopping at the mall. The proposed Heard location encompasses 25 acres in the northwest corner of the intersection of I-4 and State Road 46. The facility Heard intends to build at the relocation site is similar to what he has built at his other successful Chevrolet dealerships, and was developed over his forty years in the automobile business. The showroom will be 30 feet high with a lighted roof. It will have about 75 sales offices on the ground floor. The dealership sign will be in lighted letters six to eight feet high. The sales operation will have 30,000 square feet, compared to 2,000 square feet at the present location. The proposed facility will also include a 100,000 square foot state- of-the-art service center, with 80 to 100 service stalls and a body shop with two paint booths and approximately 30 preparation stalls, compared to only 9 service bays and no body shop at the current location. The proposed location will include a 10,000 square foot used car facility. The dealership is being oriented so that it faces south, towards Orlando, rather than towards Deland, where Fred Bondesen's facility is located. The new facility, land and buildings, will cost approximately $15 million. Fred Bondesen Fred Bondesen purchased his dealership known as Fred Bondesen Chevrolet, Oldsmobile, Cadillac, Inc. in December 1986. The facility is located in Deland, Volusia County, Florida. Mr. Bondesen had previously worked approximately 8 years for a dealer in Ft. Lauderdale, Florida, starting out as a service advisor and moving up to the parts department, the body shop, finance and insurance department, sales, and then to general manager. When the facility was purchased in 1986, it was inadequately designed. Fred Bondesen had major renovation done on the buildings, added pavement for parking and inventory and essentially remodeled the entire facility. He currently has invested approximately $1.8 million in the dealership, including $1.4 million that was used for initial capitalization and other retained earnings over the years. Fred Bondesen considers himself a "home town dealer" for the general southwest Volusia County area: Deland, Deltona, DeBary and Orange City. He considers himself to be in a good facility and a good location in the growth area of west Volusia County. His corporation has remained consistently profitable since 1988 after turning the dealership around in 1987. Geographic Definitions All Chevrolet dealers have a contractually defined geographic Area of Primary Responsibility (APR). In metropolitan markets, such as Orlando, two or more Chevrolet dealers share the same APR called a Multiple Dealer Area (MDA). In other areas, one dealer is uniquely assigned the APR, which is called a Single Dealer Area (SDA). MDA's are further subdivided into an Area of Geographic Sales and Service Advantage (AGSSA) for each Chevrolet dealer. An AGSSA is not the dealer's contractual APR; rather, it is that portion of the APR in which that dealer enjoys a competitive advantage over all same line-make dealers due solely to the dealer's geographic location. Heard is one of five dealers located in the Orlando MDA, the others being Holler, Mealey, Classic, and World. Heard's APR, the area in which he is contractually obligated to represent Chevrolet, is the entire Orlando MDA. Heard is located in AGSSA 4. Bondesen is located in Deland, Florida, in an SDA. Bonesen's APR comprises the western part of Volusia County and parts of Seminole and Lake Counties. Dealers are free to sell to customers outside their APRs, and indeed are encouraged to do so. The statutory community or territory (comm/terr) is a market area defined with reference to the proposed dealer location. It is a geographically described market in which most consumers buy from dealers within the market area and where those dealers make most of their sales. The starting point for determining the community or territory was the Orlando MDA. Both the existing and proposed Heard locations are within the Orlando MDA boundary. Once the Heard store is relocated it will be closer than any other dealer to several census tracts that are not currently part of the Orlando MDA, including five census tracts around Lake Monroe (census tracts 909.01, 909.02, 910.07, 910.08, and 910.05). In addition, in 1997, Orlando MDA dealers outsold Bondesen in census tracts 910.05, 212.01, and 212.02, which are currently in Bondesen's APR. The census tracts that will be closer to the relocated Heard or that were dominated by MDA dealers should be assigned to the proposed Orlando community or territory. The relevant comm/terr in this case is the Orlando MDA with the addition of the census tracts identified by the Petitioner's expert, Mr. Anderson, as depicted on Chevrolet Exhibit 1, p. 13. In his Proposed Recommended Order Bondesen accepts this definition of the relevant comm/terr. (page 6, paragraph 11.) AGSSA 4 is an identifiable plot within the larger comm/terr. An Objective, Reasonable Standard In order to judge the adequacy of representation afforded by the existing dealer network in the comm/terr and establish opportunity available in the marketplace, it is necessary to develop an objective, reasonable standard. Dealer network performance for a brand in a local area is judged by comparing market penetration in the local area to the market penetration in a suitable comparison area. When choosing a comparison area against which to compare the market penetration in a local area, it is essential that the comparison area must itself be adequately represented. In determining whether a comparison area is adequately represented, national average market penetration is an extremely conservative measure because it includes all of the adequately represented, in- adequately represented, and unrepresented areas within the United States. Florida average retail penetration for Chevrolet is not an appropriate standard because Florida is presently inadequately represented. Florida ranked 44th worst out of 50 states in retail penetration in 1997, and fell short of the national average from 1994 to 1997. It is necessary to determine how much of the shortfall between the Florida penetration average and national average is due to unique consumer preferences over which the dealer network has no control, and to appropriately adjust for those preferences through segmentation analysis. Unique consumer preferences can influence the market share that Chevrolet achieves in Florida relative to national average, because certain vehicle types or "segments" are more or less popular in Florida than they are nationally. The segmentation analysis applies Chevrolet's national average penetration rate for each vehicle segment in which Chevrolet has a vehicle entry, weighted by the actual number of industry registrations occurring in that segment in that local area. The resulting "expected penetration" may be higher or lower than the national average based on the preferences of customers in the local area. The segment adjustment process takes into account all of the demographic factors affecting consumer sales: age, income, education, size-class preference, product popularity, and retail lease transactions, among others. After adjusting for local Florida consumer preferences, however, there is still a significant shortfall between the expected penetration rate of 14.31 percent and the actual Florida penetration rate of 11.14 percent. Competent statistical analysis reveals that the shortfall in Florida's penetration rate is due to dealer network deficiencies. The national average performance for Chevrolet, adjusted for local consumer characteristics in AGSSA 4, the Orlando comm/terr, and the Orlando comm/terr plus Deland, is the appropriate standard for measuring the performance of the Chevrolet dealer network and for establishing the level of opportunity available to Chevrolet dealers in those areas. Reasonableness of the expected penetration standard was tested by comparing all of the markets in Florida to the expected standard for each market. Forty-one out of 78 Chevrolet APRs in Florida met or exceeded the standard, some by as much as 170 percent. Significantly, markets immediately surrounding the Orlando comm/terr met or exceeded the expected standard: Eustis exceeded the expected standard every year between 1993 and 1997, with retail registration effectiveness ranging from a low of 109.2 percent of expected to a high of 122.1 percent of expected. Kissimmee exceeded the standard every year from 1993 to 1995 by as much as 127.1 percent of expected, dipped to 98 percent in 1996, but exceeded the standard again in 1997. Daytona Beach was 115.6 percent effective in 1997. New Smyrna Beach was 109 percent effective in 1997. Even Deland exceeded the expected standard in 1993 and was 99.5 percent effective in 1994. An analysis of the demographic factors of age and income in AGSSA 4 and the Orlando comm/terr plus Deland produced a higher expectation than the registration-based expected standard, further confirming the reasonableness of the expected standard. Bondesen's expert, Dr. Schink, contends that Florida dealers cannot perform at an average (or better) level compared to the national segment adjusted standard because Floridians are somehow "import biased." But this theory is belied by the real world experience of Bondesen, which used to meet the expected standard, and of Eustis, Kissimmee, Daytona Beach, and New Smyrna Beach, which currently meet or exceed the standard. In the Orlando MDA, moreover, Chevrolet outsold two imports- Nissan and Toyota- in combined car and light truck sales. The reason Chevrolet dealers in MDAs with high import competition have not performed as well is that Chevrolet developed its dealer network in the 1920s-1940s. By contrast, the import manufacturers developed their networks in the 1970s- 1990s, specifically in urban areas. As a result, the imports have a greater proportion of newer, better-placed dealerships than Chevrolet in the large metropolitan areas, and in general they outperform Chevrolet in those markets. Before adding Classic in 1998, Chevrolet had not increased its dealer count in Orlando since the 1920s. Ford achieved 101 percent of its national average in the same Chevrolet MDAs across the country in which Dr. Schink would perdict Chevrolet could not compete against the imports. In fact, Ford does better in the Chevrolet MDAs than it does in the Chevrolet SDAs, where Dr. Schink says import competition is less intense. If Ford can compete against the imports in metropolitan markets, so can Chevrolet. Current Inadequate Representation and the Proposed Relocation's Anticipated Benefits Once the standard is developed and tested for reasonableness, the next step is to measure the actual penetration achieved by the existing Chevrolet dealer network against the expected standard and, for the purpose of illustration, against the lower Florida standard in the three study areas. Any shortfall below the expected standard reflects inadequate representation, although the greater the shortfall, the more severe the inadequacy. Three relevant study areas fell significantly short of the expected standard in 1997: The expected penetration in AGSSA 4 was 15.3 percent, compared to actual penetration of only 9.5 percent. In the Orlando comm/terr, the expected penetration was 14.9 percent, while actual was 9.6 percent. In the Orlando comm/terr plus Deland, expected penetration was 15 percent, but actual was only 10 percent. The fact that Chevrolet penetration in the Orlando comm/terr and the Sanford AGSSA respectively were the 73rd and 76th lowest ranked areas in Florida suggests that they are performing poorly under any standard. Chevrolet's representation in the Orlando comm/terr and AGSSA 4 has been inadequate and declining for at least the last three years. Performance in the Orlando comm/terr has ranged from a high of 77.2 percent of expected in 1995, to a low 64.2 percent of expected in 1997, resulting in a net registration loss in 1997 of 3,525 units. In AGSSA 4, actual penetration was worse, ranging from a high of 68.2 percent of expected, to a low of 58.1 percent of expected, with a net registration loss in 1997 of 425 units. Net registration loss is the number of additional Chevrolet units required to raise penetration in an area such as the comm/terr or AGSSA 4 up to the expected penetration rate. Even using the lower Florida average adjusted for local consumer preferences, Chevrolet's representation in the Orlando comm/terr and AGSSA 4 is inadequate now, has been inadequate for at least the last three years, and is declining. Chevrolet's poor performance in the Comm/Terr and AGSSA 4 from 1994 to 1997 reflects that Chevrolet's dealer network has provided an inadequate level of inter-brand competition in the Comm/Terr over this three-year period. Bondesen does not deny that Chevrolet's performance in the Orlando comm/terr falls short of the national segment adjusted average. Dr. Schink does not dispute that Chevrolet's performance in the Orlando comm/terr and AGSSA 4 was inadequate compared to either the national or Florida standards in 1997, and he does not know whether Chevrolet's performance in the Orlando comm/terr would meet the lower Florida standard today. Complete data from calendar year 1998 was obviously not available at the time of hearing. While Chevrolet made some significant improvements in representation due to the addition of the Classic dealership and the increased sales by Heard over his predecessor, the activity by these two dealers was still not anticipated to close the gap between actual and expected penetration rate. Chevrolet has a plan to add another dealership in Orlando in the Red Bug Road area. There is no evidence as to when that dealership might come on-line, as neither the owner nor property has been selected, and no indication whether the addition of a new dealership will require an administrative proceeding. At this time it is impossible to speculate on the impact such new dealership will have on Chevrolet's sales penetration at an unknown point in the future. From 1980 to 1997, total population, driving age population, households, employment, and retail registrations-all key measures of opportunity for motor vehicle dealers-have all grown at tremendous rates in AGSSA 4, the Orlando comm/terr, and the Orlando comm/terr plus Deland, and are projected to grow continually at significant rates through the year 2002. Employment and retail registrations in the comm/terr have more than doubled. Retail registrations in AGSSA 4 have almost tripled. Virtually all of the households in the study areas fall within the $15,000 to $60,000 income range characteristic of the typical Chevrolet buyer. Chevrolet enjoys a 9.8 percent share of industry franchises nationally, but only a 5.6 percent share in the Orlando comm/terr plus Deland. With below average share of franchises, the Chevrolet dealers in the comm/terr plus Deland enjoy a huge opportunity per dealer. However, in order to capture the opportunity, the existing dealers must be ideally located. Growth creates traffic congestion as increasing numbers of people use the roadways to shop, go to work, and go out for entertainment, producing a greater demand for convenient access to motor vehicle dealerships. Orlando already has a poor road network. In order to achieve at least average penetration effectiveness in the Orlando comm/terr with its tremendous growth, fewer than average dealer outlets, and poor road structure, Chevrolet must have better than average locations, better than average operators, or both. Traffic flows more easily with fewer interruptions on an interstate, making it easier for Heard to draw customers from Orlando on I-4. Visibility on I-4 is important because it will increase Chevrolet's profile as a brand in the comm/terr, having the dual effect of helping Chevrolet gain market share and benefitting consumers by enhancing competition among existing dealers, resulting in more competitive prices and better selection. Mr. Bondesen admits that I-4 is the primary traffic artery used by Orlando consumers. Dr. Schink testified that the relocation will make Heard more convenient to consumers in the Orlando MDA as well as to customers in the southern part of Bondesen's APR. The average daily traffic count at the proposed location is 76,000 vehicles on I-4 and 25,000 on State Road 46, making a total of about 100,000 vehicles, whereas the average daily traffic count at Heard's present location is only 42,000 vehicles. An increase in traffic count is likely to enhance Heard's ability to sell vehicles throughout the greater Orlando area. The site of the proposed relocation is a growing retail area close to the Seminole Town Center Mall, Auto Nation, and other shopping opportunities. The Seminole Town Center Mall is the only mall in Sanford and the retail center of Heard's AGSSA. Having retail activity nearby creates a good environment for selling cars. Heard's visibility on the interstate close to the shopping area would assist Chevrolet in drawing customers in the market to the dealership. When Seminole Ford, currently across the street from the existing Heard location, relocates to its I-4 site just south of the proposed Heard site, there will be an advantage to both because Ford and Chevrolet dealerships create traffic for one another. Moving the Ford and Chevrolet stores to the interstate will create a new "auto row" offering much better access for customers in the Orlando area. The proposed relocation is consistent with Chevrolet's Year 2000 Plan, which calls for maintaining representation in the Sanford AGSSA and taking advantage of opportunities to relocate dealerships to newer and more visible locations in major shopping areas. Relocation Impact On Bondesen Based on his long experience and success in Chevrolet sales, Mr. Heard anticipates that he can easily sell 3,000 Chevrolets a year at his new location and projects as many as 7,000 or 8,000 a year after a 5-year period. He also estimates there are 7,000 to 10,000 unsold Chevrolets in the Orlando market. Whether Mr. Heard's expansive figures or his expert's more precise scientific statistical analysis is applied, Bondesen's predictions of a devastating impact on his Deland dealership are less credible. Gross registration loss is a measure of the opportunity Chevrolet has lost to inter-brand competitors like Ford and Toyota, as measured by the number of additional registrations Chevrolet would need to achieve the expected penetration rate in each census tract that is presently below expected. Gross registration loss measures lost opportunity within the comm/terr, in contrast to net registration loss, which offsets losses within the comm/terr against gains within the comm/terr. In 1997, the gross registration loss in the Orlando comm/terr plus Deland was 3,653 units. In-sell measures losses to intra-brand competitors by counting the number of Chevrolets registered within the Orlando comm/terr plus Deland that were sold by dealers outside this area. In-sell represents lost opportunity to dealers within the market because while those dealers were more convenient to the customers who bought those cars, the more convenient dealers failed to offer their consumers the price, selection, service, or selling approach necessary to make the sales. In-sell in the Orlando comm/terr plus Deland in 1997 added another 1,684 units of lost opportunity. Total lost opportunity in the Orlando comm/terr plus Deland, measured by the sum of gross registration loss and in-sell, was 5,337 units in 1997, more than ample opportunity for the proposed relocation to occur without taking away sales from Bondesen or from other dealerships in the comm/terr. The sufficiency of the opportunity to support this relocation can be proven by projecting the number of incremental sales (ie., sales over and above current levels) Heard is likely to make after the relocation, assuming certain penetration profiles for Heard and for the new Classic dealership. Assuming Heard has the same penetration profile as the average of Holler, Mealey, World, and Bondesen in 1997, his incremental registrations from the proposed location into the area within 20 miles of its dealership would amount to 387 units or only 7.3 percent of the total lost opportunity in the market. If Heard performs like Holler's 1997 penetration profile, which would produce the highest number of sales of any of the existing MDA dealers, Heard's incremental sales within 20 miles of its dealership still would amount to only 628 units or 11.8 percent of the total available opportunity. Heard could double the Holler profile and still not capture all of the available gross registration loss. Even with Classic Chevrolet going into business in 1998, and assuming that it performs at either the MDA average penetration profile or the Holler penetration profile, the sum of the projected Classic sales and the projected incremental Heard sales still equals only 36.2 percent of the available opportunity if Classic has the average dealer profile, or 45.5 percent of the opportunity assuming the Holler profile. In each of these scenarios, all of the incremental sales could be made at the expense of inter-brand competitors alone. In short, even with the addition of Classic, this relocation will not come close to capturing all of the lost opportunity and solving Chevrolet's penetration problems in the Orlando comm/terr. Dr. Schink assumed (at the high end) that Heard would make between 2,261 and 3,085 sales nationwide. Orlando Chevrolet dealers typically capture about 85 percent of their nationwide sales from the comm/terr plus Deland. Therefore, Dr. Schink's nationwide sales estimates would translate into 1,922 and 2,622 sales within the comm/terr plus Deland. Even if Heard sells 1,922 vehicles and Classic sells 1,800 nationwide or 1,530 within 20 miles (the highest projected number of sales for Classic), this results in a total of 3,452 units. After deducting the 460 sales Heard made from his present location in 1997, the total incremental sales of 2,992 is only 56 percent of the available lost opportunity. If Heard sells 2,622, the equivalent result is 3,692 incremental units, or only 69 percent of the available opportunity. Bondesen's current APR has a gross registration loss of 190 units and in-sell of 419 units (excluding sales from MDA dealers) for a total lost opportunity of 609 units. Assuming Heard matches either the average dealer penetration profile or the Holler profile, Heard's incremental sales into the Deland APR would capture less than 15 percent of the lost opportunity available there. If Heard doubled Holler's penetration profile, the incremental sales in Bondesen's APR would be 258 units or 42 percent of the lost opportunity. Even if Heard tripled Holler's profile (which would result in over 3,600 units nationwide), the incremental sales in the Bondesen APR would be 430 units, or 71 percent of the lost opportunity. In 1997, Herd registered 16 percent of his sales in Volusia County. Even if, as Dr. Schink projects, the relocated Heard sells 2,261 units nationwide, only 16 percent of those or 362 units would be registered in Volusia County. Since Heard already makes 90 sales into Volusia County from his existing location, his incremental sales into Volusia county would be 272 units. This assumed scenario would capture only 45 percent of the 609 units of opportunity that was available in Bondesen's APR in 1997. The same calculation, using Dr. Schink's highest estimate of 3,085 units nationwide, results in Heard capturing only 66 percent of the opportunity that was available in 1997 in Bondesen's APR. From 1995 to 1997, the minimum level of opportunity available to Bondesen in his own APR far exceeded his actual sales nationwide. Bondesen's APR was only 89.4 percent registration effective in 1997. Of the Chevrolets registered in the Deland APR, only 39 percent are attributable to Bondesen's sales. Bondesen admits that his APR is performing below its potential and that he should be capturing more sales. He testified that all of Volusia County is a growth area and he acknowledged that this growth represents opportunity for him to make more sales. Dr. Schink concedes that household growth is one of the key factors driving motor vehicles sales, and that household growth in Bondesen's APR is expected to increase at a rate of 1.1 percent per annum from 1997 to 2001. Product allocation cannot explain Bondesen's poor sales performance relative to expected, since all Chevrolet dealers nationwide operate under the same "turn and earn" allocation system. Bondesen's gross profit per new vehicle, which he controls, exceeded the Tampa Zone average in 1997 on every model that Chevrolet makes except Corvette. Bondesen's high profit margin in the presence of high lost opportunity and low market share reflects that Bondesen could be more price competitive, that Bondesen faces inadequate intra-brand competition, and that consumers are paying uncompetitive prices for new Chevrolets at Bondesen's store. Dr. Schink's financial impact model assumes that Bondesen is either a stand-alone Chevrolet store or a Chevrolet/Oldsmobile/Cadillac store without his satellite used car operation. Contrary to this assumption, however, Bondesen Chevrolet, Oldsmobile, Cadillac, Inc. is a fully integrated operation. It is a single corporate entity. It prepares a single set of financial reports for combined dealership operation, including the satellite used car operation, because doing so saves accounting costs. It has a substantial number of company-wide expenses, such as a single overall sales manager, a single clerical staff, and one group of office personnel, all of which are utilized in and supported by the combined dealership operations. Bondesen has no plans to dispose of his Oldsmobile, Cadillac, or satellite used-car operations. Trade-ins on his new-car sales feed Bondesen's satellite "buy-here/pay-here" lot, where he is able to profitably retail the less desirable trade-ins that other dealers typically dispose of wholesale. In fact, Bondesen's operation is substantially geared toward its used-car operation and, from 1993 to 1997, derived most of its profit from used-car sales. Because of this heavy emphasis on used cars, the loss of some new Chevrolet sales as a result of the proposed Heard relocation will not cause substantial financial hardship to the Bondesen operation. Bondesen is a well-capitalized, well-managed, highly profitable integrated dealership that is fully capable of responding to competitive forces in the marketplace. In 1998 Bondesen had to face the opening of Classic Chevrolet, which was projected to sell some 1,500 to 1,800 new units, the increase in Heard's sales to twice the level Rummel and Heard sold in 1997, and Auto Nation going into business and competing for used-car customers; yet despite all of this new competition Bondesen increased his sales of new Chevrolet cars and trucks slightly over the prior year, and he was projected to be more profitable in 1998 than he was the prior year. Overall Benefit of the Proposed Relocation The proposed relocation would benefit consumers in the Orlando comm/terr by providing more convenient access to Heard, a more competitive environment leading to lower prices, a better inventory, and a state-of-the-art showroom in which to shop. Heard's Customer Service Index (CSI) is poor but improving at his current facility. It takes time to build CSI after purchasing an existing dealership. Heard has a CSI specialist on staff at every one of his stores, and has improved CSI performance at other dealerships he has purchased. There is no evidence to suggest that the level of customer service Heard can offer consumers would decline as a result of his relocation. CSI alone does not govern a dealer's market share. Customers often trade off one dimension of the buying experience against another, so a dealer can make up for a negative in one area, such as CSI, by offering a positive in other areas, such as selection or price. Bondesen also has low CSI scores, having failed to meet his contractual obligations regarding CSI from 1992 to February 1998. The public will benefit from the relocation through employment that the new facility construction will generate, and through increased tax revenues from the new dealership. The licensee, Chevrolet, will benefit from the relocation by improving its chances of achieving the minimum level of expected market share in the Orlando comm/terr and AGSSA 4 through enhanced sales from the relocated store. Through the process known as stimulated competitive response, existing Chevrolet dealers, including Bondesen, will benefit from the relocation if they respond positively to the competition by increasing their sales due to the increased advertising, brand awareness, competition, and customer traffic that the relocated Heard dealership will generate.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED: that the Department of Highway Safety and Motor Vehicles issue its final order approving the Petitioners' application to relocate Heard's Chevrolet dealership. DONE AND ENTERED this 1st day of February, 1999, in Tallahassee, Leon County, Florida. MARY CLARK 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 February, 1999. COPIES FURNISHED: Daniel E. Myers, Esquire John W. Forehand, Esquire Myers, Forehand & Fuller 402 Office Plaza Drive Tallahassee, Florida 32301 Counsel for Fred Bondesen Chevrolet Oldsmobile, Cadillac, Inc. Fred Lotterhos, III, Esquire Holland & Knight, LLP 50 North Laura Street, Suite 3900 Jacksonville, Florida 32202 Counsel for Chevrolet Motor Division, General Motors Corporation Louis Anders, Esquire Joseph Letzer, Esquire Burr and Forman 3100 Southtrust Tower Birmingham, Alabama 35203 Co-Counsel for Bill Heard Chevrolet Corporation-Orlando d/b/a Bill Heard Chevrolet Dean Bunch, Esquire Sutherland, Asbill & Brennan, LLP 2282 Killearn Center Boulevard Tallahassee, Florida 32308 Co-Counsel for Bill Heard Chevrolet Corporation-Orlando d/b/a Bill Heard Chevrolet Michael Alderman, Esquire Office of the General Counsel Department of Highway Safety and Motor Vehicles A432 Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Charles J. Brantley, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500 Enoch Jon Whitney, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
The Issue Whether the fuel in question was contaminated.
Findings Of Fact Lawrence Oil Company, doing business as Lyles Pit Stop, applied for and received approval to sell unleaded premium gasoline under the brand name "Rex Premium." It was determined during a routine inspection and testing of "Rex Premium" that this gasoline contained more than three grams per gallon of lead, sufficient lead to qualify as a leaded premium. See Report, Exhibit 1. The Department of Agriculture and Lawrence Oil Company entered into an agreement under which Lawrence Oil paid a $1,000 bond, and the gasoline in question was released by the Department to be sold under the Department's supervision in accordance with its lead content.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that the $1,000 bond previously posted be forfeited and no further action be taken. DONE and ORDERED this 4th day of April, 1980, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Leslie McLeod, Jr., Esquire Assistant General Counsel Department of Agriculture and Consumer Services Room 513, Mayo Building Tallahassee, Florida 32301 Mr. Alfred C. Vittorino General Manager, Marketing and Retail Lawrence Oil Company 7950 M 58th Street Miami, Florida 33166
The Issue Whether or not the agency may, pursuant to Section 525.06, F.S. enter an assessment for sale of substandard product due to a violation of the petroleum inspection laws and also set off that amount against Respondent's bond.
Findings Of Fact Frank Hampton, d/b/a Hampton's Gulf Station, has operated at 2610 North Myrtle Avenue, Jacksonville, for many years and has had no prior complaints against it by the Petitioner. Respondent is in the business of selling kerosene, among other petroleum products. The facts in this case are largely undisputed. On November 28, 1990, Bill Ford, an inspector employed with the Department of Agriculture and Consumer Services, visited the Respondent's premises to conduct an inspection of the petroleum products being offered for sale to the public. Ford drew a sample of "1-K" kerosene being offered for sale, sealed it, and forwarded it to the agency laboratory in Tallahassee where John Anderson, under the supervision of Nancy Fischer, an agency chemist, tested it to determine whether the sample met agency standards. The testing revealed that the sampled kerosene contained .21% by weight of sulfur. This in excess of the percentage by weight permitted by Rule 5F- 2.001(2) F.A.C. for this product, but it would qualify as "2-K" kerosene. A "Stop Sale Notice" was issued, and on the date of that notice (November 30, 1990) the tank from which the test sample had been drawn contained 3887 gallons of product. It was determined from Respondent's records that 4392 gallons had been sold to the public since the last delivery of 5500 gallons on November 16, 1990. The product was sold at $1.58 per gallon. The calculated retail value of the product sold was determined to be in excess of $1,000.00, and the agency permitted the seller to post a bond for $1,000.00 (the maximum legal penalty/bond) on December 3, 1990. The assessment is reasonable and conforms to the amount of assessments imposed in similar cases. On this occasion, Respondent had purchased the kerosene in question from a supplier which is not its usual wholesale supplier. This was the first time Respondent had ever ordered from this supplier and it is possible there was some miscommunication in the order, but Respondent intended to order pure "1-K" kerosene. Respondent only purchased from this supplier due to the desperate need in the community for kerosene during the unusually cold weather that occurred during the fall of 1990. Respondent ordered "1-K" kerosene and believed that "1-K" had been delivered to it by the new wholesale supplier up until the agency inspector sampled Respondent's tank. After posting bond, Respondent originally intended to send the unused portion of "2-K" kerosene back to its supplier, but instead was granted permission by the agency to relabel the remaining product so that the label would correctly reflect that the product was "2-K." Respondent accordingly charged only the lesser rate appropriate to "2-K" kerosene for sale of the remaining 3887 gallons.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Cnsumer Services enter a final order approving the $1,000.00 maximum penalty and offsetting the bond against it. DONE and ENTERED this 20th day of June, 1991, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of June, 1991. COPIES FURNISHED TO: FRANK HAMPTON HAMPTON VILLA APARTMENTS 3190 WEST EDGEWOOD AVENUE JACKSONVILLE, FL 32209 CLINTON COULTER, JR. ESQUIRE DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES (LEGAL) MAYO BUILDING, ROOM 510 TALLAHASSEE, FL 32399-0800 HONORABLE BOB CRAWFORD COMMISSIONER OF AGRICULTURE THE CAPITOL, PL-10 TALLAHASSEE, FL 32399-0810 RICHARD TRITSCHLER, GENERAL COUNSEL DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES 515 MAYO BUILDING TALLAHASSEE, FL 32399-0800
The Issue The issues are whether Respondent violated Section 475.25(1)(b), Florida Statutes, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the duty of prosecuting administrative complaints pursuant to Chapters 455 and 475, Florida Statutes. Respondent is and was, at all times material hereto, a licensed Florida real estate salesperson. He holds license number 0487661. Respondent was working as a real estate salesperson in association with Global Realty of Volusia, Inc. (Global Realty) in Deltona, Florida, when he received his current license. In 1993, Paul Costello owned a residence (hereinafter "the property") in Deltona, Florida. Mr. Costello lived in Miami, Florida. He rented the property to tenants who informed him that cracks were developing in the property's driveway. Additionally, the house was settling and cracking. Mr. Costello subsequently made a claim for the property's reported distress on his homeowner's insurance policy with Republic Insurance Company. The insurance company retained a geotechnical engineering firm to determine the cause of the reported distress. The engineering firm made a site visit to the property on August 22, 1993. A visual inspection revealed cracks up to one and one-half inches wide in the exterior walls of the garage. The engineering firm completed its investigation in September 1993 and concluded that the property was subject to sinkhole conditions/activity. Based on the recommendations of the engineering firm, the insurance company hired a grouting contractor. Deep cement grout injections and shallow grouting (mudjacking) were performed in an attempt to stabilize the loose soil conditions on the property. Steel piles were used to raise and support the structure's footing. The stabilization effort took approximately two months to complete. In 1995, Shawna Lee Christenson and Janice Beery worked as licensed real estate salespersons for Choice Properties, Inc., (Choice Properties) in Deltona, Florida. Jean Gillian, a licensed real estate broker and owner of Choice Properties, gave Ms. Christenson and Ms. Beery their first employment as real estate sales associates. Because they were new to the real estate profession, Ms. Gillian directed Ms. Christenson and Ms. Beery to work as partners. Respondent was also working at Choice Properties when Ms. Gillian hired Ms. Christenson and Ms. Beery. He worked for Choice Properties for several weeks before returning to Global Realty as a sales associate. Sometime prior to October 22, 1995, Ms. Christenson received a call from a woman in Orlando. The woman, a friend of Mr. Costello's, requested Ms. Christenson to perform a market analysis on the property. Ms. Christenson and Ms. Beery performed the market analysis on the property. Subsequently, they received permission from Mr. Costello to list the property for sale as a multiple listing. Ms. Christenson and Ms. Beery signed a listing agreement with Mr. Costello. About that time, or soon thereafter, Ms. Christenson had a telephone conversation with Mr. Costello. During the conversation, Mr. Costello informed Ms. Christenson about possible prior sinkhole activity on the property. Ms. Christenson and Ms. Beery discussed the problem with Ms. Gillian. Everyone at Choice Properties thought the situation was humorous because the property was the first listing for Ms. Christenson and Ms. Beery. Later, Mr. Costello sent Ms. Christenson a document with the name of the geotechnical engineering firm. Ms. Christenson then contacted Mike Wilson, a friend who worked in soils engineering. Mr. Wilson contacted the engineering firm and requested that a copy of its settlement claim evaluation report be sent to Ms. Christenson. Ms. Christenson placed a copy of the engineering firm's report in the property's file at Choice Properties. She disclosed the possible sinkhole activity to everyone who called about the property. She advised all callers that the report was in the file. After learning about the possible sinkhole activity, real estate agents would not show the property to their customers. Sometime in October 1995, Barbara Redding, a single disabled female, contacted Respondent after seeing an advertisement in the newspaper. Respondent was aware that Ms. Redding was a recipient of Social Security benefits. On or prior to October 22, 1995, Respondent telephoned Ms. Christenson to inquire about the property. He told Ms. Christenson that he had a client (Ms. Redding) who was a Social Security recipient and really needed a home. Respondent was interested in the property because it was within Ms. Redding's price range and had an assumable mortgage. Ms. Christenson disclosed the possible sinkhole activity to Respondent. She told him that the engineering firm's report was in the file. Respondent declined Ms. Christenson's offer to fax the report to him. Ms. Christenson was surprised to learn that Respondent intended to show the property to Ms. Redding despite the disclosure about the sinkhole activity. Sometime after the initial phone call, Ms. Beery was outside the office of Choice Properties smoking a cigarette. Ms. Christenson was with Ms. Beery when Respondent arrived. As he walked into the office, Respondent joked about the fact that Ms. Christenson's and Ms. Beery's first listing was on a sinkhole. Respondent showed Ms. Redding four or five houses, including the subject property. After seeing the property, Ms. Redding contacted Respondent to make an offer to purchase it. Respondent prepared a contract for sale and purchase, which Ms. Redding signed on October 22, 1995. Respondent was acting as buyer's agent for Ms. Redding. The contract states that a deposit in the amount of $100 was held in escrow by "Associated Land Title upon acceptance by October 30, 1995." Respondent included the following language in the contract as an addendum: Seller agrees to remove branch from roof and repair roof and soffit where branch is presently lodged. This offer is contingent on Buyer receiving settlement from Social Security that has already been awarded. Seller agrees to close at Associated Land Title contingent on all payments being up to date. Regardless of principal balance, cash to mortgage [sic] will be $6,000 (six thousand dollars.) Respondent hand-delivered the contract for sale and purchase to Choice Properties. Mr. Costello, through Ms. Christenson and Ms. Beery, made a counter offer for a higher purchase price and a $500 deposit. The counter offer eliminated language in the contract addendum related to removal of the branch and repair of the roof. It also deleted the language related to $6,000 cash payment. The offer included an additional addendum to the contract that stated as follows: Buyer acknowledges that there has been disclosure regarding the driveway and previous activity affecting it. Seller reserves the right to leave property on market to entertain offers. Buyer acknowledges property is being sold "AS IS." Ms. Christenson and Ms. Berry asked Ms. Gillian to review the language in the contract addendum before they returned the contract to Respondent. After Ms. Gillian approved the statement, Ms. Christenson and Ms. Berry returned the contract to Respondent. Ms. Redding only had $100 in cash for a deposit. Respondent offered to loan her the other $400. Ms. Redding accepted Respondent's offer and signed a promissory note to that effect. Ms. Redding subsequently paid Respondent the $400 that she owed him. When Ms. Redding reviewed the counter offer, she asked Respondent about the additional language in the contract addendum stating that the buyer acknowledged disclosure about the driveway and previous activity affecting it. Respondent told Ms. Redding that the driveway had been cracked and that a new driveway had been put in. Respondent never discussed possible sinkhole activity with Ms. Redding. The contract closed in November 1995. After painting the house, Ms. Redding moved in on January 20, 1996. Sometime in March or April of 1996, a friend of Ms. Redding's asked her if she knew she had purchased a home on a sinkhole. Ms. Redding then discovered that all of her neighbors were aware of the problem. Ms. Redding contacted Richard Meyer, a professional geologist who works for the Volusia County Environmental Management Department. Mr. Meyer inspected the property in August 1996 and on three subsequent occasions. In the meantime, Ms. Redding contacted Ms. Christenson and Ms. Beery. They told Ms. Redding that they had advised Respondent about the sinkhole activity prior to Ms. Redding's purchase of the property. Ms. Gillian showed Ms. Redding a copy of the engineering report from the property's file at Choice Properties. Ms. Gillian gave Ms. Redding a copy of the report. Ms. Redding showed the engineering report to Mr. Meyer on one of his visits. Mr. Meyer determined that the property definitely was subject to sinkhole activity. He concluded that the property was a "slow sinking hole." Ms. Redding did not contact Respondent after she learned about the sinkhole on the property. At that point in time, Ms. Redding felt intimidated by Respondent. One day Ms. Redding heard a loud crunch as she was going into her garage. She asked the fire department to inspect the property to determine whether it was safe as a dwelling. The fire department determined that the property was not safe for habitation. Ms. Redding moved out of the house and had it demolished in October 1996 after the fire department condemned it. Ms. Redding's insurance company "totaled" the property.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Florida Real Estate Commission enter a final order revoking Respondent's real estate license. DONE AND ENTERED this 28th day of June, 1999, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 28th day of June, 1999.
