The Issue The issue in this case is whether Respondent failed to execute a written agreement with the owner of property to be auctioned and, if so, what penalty should be imposed.
Findings Of Fact Respondent is a licensed auctioneer, holding license number AU 0000415. Respondent and Danny Mitchell are coworkers at a County mosquito control agency. Mr. Mitchell and his wife Joan were selling their house and moving out of town. Wanting to sell their personal possessions fast, they agreed that Mr. Mitchell would contact Respondent and ask him about conducting an auction. In late March 1993, Respondent visited the Mitchells at their home to view the property to be auctioned. Based on the number and quality of the property available for auction, Respondent realized that the auction would not raise much money. He estimated the value of the property to be auctioned at $1200 to $2000. Respondent did not require the Mitchells to sign a contract right away. Because of the friendship between Mr. Mitchell and Respondent, Respondent allowed the Mitchells to sell or give away items without Respondent's approval prior to the auction, and they sold $525 worth of items in the interim. Even the auction date was left open. The Mitchells did not want the auction to take place until they were closing on the sale of their house. For the next three months, the Mitchells sold and gave away what property they could. Then, without much notice, they told Respondent that they wanted the auction to take place. The Mitchells and Respondent agreed that the auction would take place July 24, 1993. Respondent discussed with Mr. Mitchell the need for advertising, which would come out of the Mitchells' share of the proceeds. The Mitchells agreed on fairly modest advertising. Respondent never obtained a written contract in the days prior to the auction. Although he was in frequent contact with Mr. Mitchell at work, there was some awkwardness in presenting the contract to him because Mr. Mitchell does not read or write. Respondent instead agreed to meet the Mitchells at their house on the morning of the auction, and he intended to present them a contract at that time to sign. Respondent appeared at their house at the agreed-upon time with a contract to be signed. However, he did not insist that they read and sign the contract because, as Respondent arrived, the Mitchells were rushing out of the house to take care of other matters. Consistent with their intent all along, the last instructions that the Mitchells gave Respondent was that he had to sell everything so the new homeowners could get into the house and the Mitchells would not have to move anything. Only about ten bidders appeared for the auction. Bidding was low. Respondent wanted to stop the auction, but had no way to contact the Mitchells, who did not try to contact him that day. Recalling the final instructions about selling everything, Respondent continued with the auction. After about an hour and a half, the auction ended with everything sold. Respondent claims that he received $499.50 in sale proceeds. It is unnecessary to determine whether this testimony should be credited. Respondent did not hear from the Mitchells for two weeks after the auction. One day, Mr. Mitchell returned to work from his vacation and asked for his money. Bringing the money the next day to work, Respondent gave the Mitchells a check for $200 with a settlement sheet itemizing the expenses. Upon the insistence of Mrs. Mitchell for documentation of the auction sales, Respondent later provided the Mitchells with copies of the clerking tickets. The estimated value of the auctioned property exceeded $500.
Recommendation It is RECOMMENDED that the Board of Auctioneers enter a final order reprimanding Respondent. ENTERED on July 28, 1995, in Tallahassee, Florida. ROBERT E. MEALE 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 on July 28, 1995. COPIES FURNISHED: Linda Goodgame, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792 Susan Foster, Executive Director Board of Auctioneers Northwood Centre 1940 North Monroe Street Tallahassee, FL 32399-0792 Charles F. Tunnicliff, Chief Attorney Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792 Bruce C. Scott 2424 McGregor Boulevard Ft. Myers, FL 33901
Findings Of Fact Nelson Martinez together with others purchased the truck distributorship known as Ocala Mack Sales, Inc. It was bought from George Raney on or about March 1, 1985. In January, 1989, Respondent still owed Raney $370,000 for that purchase. In furtherance of the purchase Martinez on behalf of the Respondent entered into a Floor Plan Financing Agreement with Mack Financial Corporation (MFC), a subsidiary to the Petitioner. Martinez also executed two distributor agreements with Petitioner. These events took place on March 26, 1985. Petitioner is a corporation which has its principal place of business in Allentown, Pennsylvania. That business involves the manufacture and sale of Mack trucks and related products. MFC is the credit administration arm of the Petitioner. It has its principal place of business in Allentown, Pennsylvania. The credit arm, at its discretion, serves as a lender to the several distributors, to include Respondent, in the financing of new and used trucks, parts and other Mack products. In accordance with his agreements, Respondent sells new Mack trucks, used trucks, Mack parts and products as well as servicing the vehicles. The geographical area which constitutes the principal territory which Respondent is responsible for consists of Marion, Gilchrist, Levy, and Dixie Counties in Florida. The Distributor Agreements entered into between Petitioner and Respondent do not prohibit sales in the international market or outside the assigned geographical area in Florida. At the inception of the distributorship Martinez signed a $375,000 promissory note in April, 1985. That obligation is referred to as the capitol loan. Its terms call for the repayment of the principal in five years under monthly installments of $6,250. Although the terms of the note call for the payment on the 15th of each month, by oral agreement during the life of the note Respondent was allowed to remit payment by the end of each month. It is specified in the agreement that Respondent upon default is obligated to pay the entire unpaid balance immediately. In Paragraph 1 to the Floor Plan Financing Agreement, MFC has reserved to itself the ability to refuse or limit Floor Plan Financing when in its judgment the credit standing or financial condition of the distributor, such as the Respondent, would not warrant an extension of credit. These limitations can occur in those instances where the distributor carries excessive inventory for a two-month period. Finally, should the distributor default on payment of any obligation owed to the Petitioner or MFC, MFC may refuse or limit the Floor Plan Financing. Respondent's Floor Plan Financing Agreement with MFC, at Paragraph 6, obligates the Respondent to keep the floor plan vehicles free of all taxes, liens and encumbrances. Paragraph 7 to the Floor Plan Financing Agreement between Respondent and Petitioner requires that the distributor keep cash received from the disposition of vehicles that were subject to the floor plan obligations separate from the other funds and property of the dealership. That same paragraph requires the Respondent to immediately remit the proceeds from the sales of any vehicle under the floor plan to MFC. Notwithstanding remarks by Mr. Martinez that he is not particularly familiar with the details of the Floor Plan Financing Agreement, he and other members of Respondent corporation would be subject to the Floor Plan Financing Agreement terms throughout the history of the dealership absent written amendments or oral agreements which restructured those terms. In executing the Distributor Agreements for sale of "Mack vehicles" and "Mack mid-liner vehicles," Respondent subjected itself to the possible termination of those agreements should the Respondent default on the payment obligations to Petitioner or MFC. George Brigman who was the district manager for MFC in the period 1980 through 1990 had explained the nature of the policies and procedures of Petitioner and MFC as it spoke to the Floor Plan Financing Agreement and Distributor Agreements executed between Petitioner/MFC and Respondent concerning payment of the floor plan, capitol loan and parts accounts. From the inception of Respondent's dealership until notice was given concerning the termination, Brigman was conversant with Respondent's financial position vis-a-vis its obligations to Petitioner and MFC. There is some question concerning Respondent's capitol position at the inception of its business. Nonetheless it chose to pursue the enterprise. Within six months its capitol position was weak and it continued to be weak until December, 1989, when Petitioner gave the Respondent the termination notice. Respondent's business practices contributed to this under capitalization. Concerning the related topic of repayment of the capitol loan, Respondent did not make the payment due on September 31, 1989. Thus, by October, 1989, it was in default. In particular, it was in default on October 5, 1989 when Petitioner took control of Respondent's truck inventory of new and used vehicles in an action in replevin. The cash flow problems which Respondent experienced over time were especially grave in that period January 1988, through October 1989. Concerning the inventory, MFC had established a $150,000 floor plan financing limit on used trucks which Respondent held in its inventory. In this connection Respondent participated in the evaluation of used inventory by submitting its opinion of the appraised value of a used truck as a predicate to the decision by MFC on the amount of floor plan financing to be assigned that truck. Respondent also pursued in-house financing of used trucks held in inventory. That practice had an adverse affect on cash flow and the ability to meet financial obligations incumbent upon Respondent. On October 1988 Respondent's used truck floor plan financing balance was $294,000. From that point forward it did not fall below the $150,000 limit, although there were occasions when some improvement was shown in Respondent's attempts to comply with the credit ceiling. Commencing November 1988, MFC in cooperation with the Respondent made a conscientious attempt to reduce the floor plan financing debt below the $150,000 credit limit. As an incentive, in January 1989 MFC imposed the requirement that Respondent sell a used truck before an additional used truck would be included within MFC Floor Plan Financing Agreement for used trucks. MFC also called for an assessment of each additional truck to be placed in the used truck inventory and floor planned by MFC. MFC went so far as to advise Respondent that should it not reduce the used truck inventory that it might be required to pay curtailments on the existing inventory. The concept of curtailment is one calling for the dealership to pay off a vehicle in inventory to reduce the floor plan debt. MFC in this time frame was particularly concerned about used trucks that had been held in Respondent's inventory for a long period of time. The range of financing of the used truck floor plan held by MFC in the January through June 1989 period was as follows: January, $281,956.45; February, $168,627.79; March, $162,673.63; April, $215,861.20; May, $236,863.54, and June, $274,841.73. In addition to the problems with control of used truck inventory, Respondent also had tax problems. In late 1988 Respondent owed the United States Government $190,000 in unpaid Federal Excise Tax. It also owed the State of Florida under a tax warrant issued in Alachua County, Florida, on July 24, 1989. That amount was $155,916.61, related to unpaid sales tax. Respondent had been aware of that obligation in early 1989. This refers to the fact that Respondent had consciously sold trucks, collected sales tax for those sales, and failed to remit to the State of Florida in the subject period. Nelson Martinez as the person responsible for Respondent's business affairs recognized the legal requirement to remit the sales and excise taxes to the respective governments. Although Martinez arranged a payment schedule to satisfy the tax warrant issued by the State of Florida, and met the payment schedule, that encumbrance still affected Petitioner's financial position as well as that of Respondent. Petitioner was aware of the arrangement to pay the tax lien and compliance by Respondent with the payment schedule, but this did not prohibit the Petitioner from taking the actions it did in view of the existence of that lien. Nelson Martinez had made no mention of the existence of the two tax obligations to either Petitioner or MFC with the exception that information about the tax was included in the June 1989 financial statement from Respondent to Petitioner. In view of the tax lien held by the State of Florida, Petitioner in the person of MFC notified Respondent that floor plan financing would not be extended for future new, and by inference used trucks, placed in inventory and that the sale of new trucks and parts from Petitioner to Respondent would be on a C.O.D. (collect on delivery) basis. This notification took place on September 20, 1989. When Respondent became a franchisee it was extended a $250,000 credit limit on its parts account. That credit limit was increased to $330,000 in May 1988. In the history of the parts account, Mr. Martinez had been informed by Brigman through correspondence of December 6, 1985, concerning the necessity to pay $172,000 outstanding on that account by December 16, 1985, or be placed on a C.O.D. basis. This was followed by correspondence of December 23, 1985, Brigman to Martinez concerning the payment of outstanding indebtedness on the parts account by January 15, 1986. Correspondence of February 20, 1987, from Brigman to Martinez continued to discuss the problem of payment on the parts account. That correspondence followed a letter of February 13, 1987, from Brigman to Martinez referring to the then outstanding balance of $548,321.53 effective January 30, 1987. Martinez was reminded that on February 2, 1987, the parts account had been credited in the amount of $49,612.77, leaving a balance of $498,808.76. The aging of that account was a current balance of $242,809.50 with $255,999.26 in the 1 to 30 day past due section. The correspondence called for a payment of $100,000 of that 1 to 30 day balance by February 16, 1987, with that 1 to 30 day balance to be paid by February 27, 1987. Similarly, during the year 1986, Respondent's parts account had been routinely 30 days past due and the practice by Respondent was to pay the 1 to 30 day amount when the following statement was received which was around the tenth of the month. Given credit problems on the parts account, Respondent was eventually placed on a C.O.D. payment basis from August through November, 1987 based upon its failure to pay the amounts owed that were over thirty days past due. In early 1988 Respondent arrived at an arrangement with MFC which made it responsible to pay only those amounts which were 31 to 60 days overdue by remitting payment by the end of each month. In August 1989 the amount over 30 days past due, or in the 31 to 60 category, which had not been paid was $69,000, and in September of that year the amount over 30 days past due was $165,000. The business practices of Respondent had led to problems with paying the parts bill as well as paying the taxes. In particular, some of the decisions on in-house financing of used trucks had promoted these problems. About $400,000 of this financing was on the books in the spring of 1989 attributed to persons who were poor credit risks that had been turned down by other lending institutions. Although Respondent had placed uncollected judgements against "an awful lot of the folks" that had bought the used trucks, the trucks themselves were not worth repossessing in the estimation of Respondent's General Manager Theordore D. Steele as an alternative means of collecting the debt. In addition to its indebtedness to Petitioner, Respondent had considerable other debt obligations for operating its dealership in the period in question. Notwithstanding Respondent's debt position, Petitioner during the history of the relationship with Respondent did not place undue pressure on the Respondent to honor its debt obligations to the Petitioner. When it was finally necessary to take the drastic action that occurred in September 1989 to protect its financial interest, Petitioner was justified in that course of conduct. Another problem experienced with the Respondent concerning its financial obligations to the Petitioner involved what is referred to as "sales out of trust." That condition occurs, generally stated, when a truck is not on the distributor's lot and payment has been received by the distributor but not remitted to MFC. The custom and practice calls for Respondent to remit to MFC upon payment from a customer; however, three or four days are allowed from receipt of the customer's payment until MFC receives its funds. Under those circumstances the transaction would not be considered a sale out of trust. MFC had made the Respondent mindful of the payment procedures on a number of occasions to include written explanations by correspondence of April 23, 1985; September 25, 1985, and July 21, 1987. Although these explanations were clearly understood by the Respondent, it made sales out of trust numerous times. It also failed to segregate the proceeds from sales of trucks in violation of the Floor Plan Financing Agreement. By a conversion report of January 1986, prepared for Petitioner, references were made to sales of out trust from November 27, 1985 to January 2, 1986. There were nine trucks involved, one of which was worth $18,000, three of which were valued in the $20,000 range and the remainder of which were in the mid $50,000 bracket. As a consequence, MFC picked up the Manufactures Statements of Origin (MSO) for new trucks and titles to all used trucks in Respondent's inventory to be released as the units were sold. This is in contrast to the usual practice of having the distributor control the MSOs and titles pending sales. The inability of Respondent to control the MSOs and titles remained in effect until October 1986. When an audit was conducted by MFC concerning the Respondent's operation effective July 21, 1989, it was discovered that a truck sale had been made on June 23, 1989, for which no payment had been made. The truck sold on June 23, 1989, was paid for at the time of the July 21, 1989, audit. A further audit on July 31, 1989, revealed that five trucks had been exported to Puerto Rico without the authorization of MFC. The trucks exported to Puerto Rico were paid for on August 3, 1989. Based on these events, Respondent was advised not to export trucks without payment being received. On August 18, 1989 another audit was made. MFC discovered that Ocala Mack had exported units to the Dominican Republic and Puerto Rico. The letters of credit on these units had expired. Respondent did not pay for the subject trucks at the time of the audit. Instead, Respondent indicated that payment would be made when the letters of credit were cashed. Respondent was again advised that if this practice of export and no arrangement for payment persisted restrictions would be placed on dealership sales. At the time of the September 8, 1989, audit by MFC, payment on the above described units had not been received. As a consequence, the MSOs and titles for vehicles in inventory were picked up with the exception of two MSOs which the Respondent requested be retained because they had acquired purchasers for those units. Respondent committed itself to immediately pay MFC for those two units when the sells were consummated. By correspondence of September 15, 1989, directed from Brigman to the attention of Martinez, payment was requested for the sale of a unit to Shell Company in the West Indies which had been previously sold. When an audit was performed on October 2, 1989, Respondent was found to be out of trust relating to the sales of the two vehicles for which the MSOs had been left with the Respondent following the September 8, 1989, audit. Respondent understood pursuant to the terms of its contractual arrangements with MFC that money received for sales, such as those described, belonged to MFC and not to Respondent and that Respondent was not in a position to use the proceeds from those sales at its discretion. Moreover, the circumstances concerning the sales did not fall into the category of exceptions related to trucks missing from the dealership which were away for preparation at a body builder with proof of that arrangement through a receipt at the dealership issued from the body builder; away from the dealership pursuant to a demonstration agreement with a copy of that agreement available at the dealership or based upon a deferred billing and assignment that had been agreed to by MFC. In the audit that took place on October 2, 1989, MFC demanded that all new and used vehicles be turned over to its control. Respondent was not willing to comply with that request without a court order. On that same date, October 2, 1989, Respondent shipped four 1989 model trucks to Cementos Nacionales in the Dominican Republic. The value of those trucks was $236,744. Respondent received payment for those trucks in October 1989, but never remitted payment to MFC as required. Instead, Respondent used the proceeds from the sale to pay $102,000 for the two previously described trucks, whose sale out of trust was noted at the October 2, 1989, audit, with a balance of the proceeds from the $236,744 being used to pay C.O.D. for parts and to pay other suppliers. At the time Respondent sold the four trucks in question, it had no other arrangements for independent financing of its dealer operations which would have allowed it to meet its obligations to MFC. Respondent had made attempts to secure alternate means of floor plan financing separate and apart from its arrangement with MFC but without success. Respondent had also attempted to secure working capital from Petitioner in the amount of approximately $300,000 in April of 1989. The request was not granted. When Respondent chose to distribute the proceeds from the sale of the four trucks in the manner described, that was a decision reached in exercising its discretion and business judgment unrelated to the advice of others. On September 29, 1989, when Respondent sold the two trucks which were found out of trust in the audit of October 2, 1989, it had anticipated being able to pay for those trucks based upon proceeds realized in the floor planning of five used trucks taken in trade. It held this opinion in spite of the fact that effective September 20, 1989, the Floor Plan Financing Agreement for new and used trucks to be obtained in the future had been terminated. Consequently, MFC refused to floor plan the five used trucks. Being unable to gain financing, Respondent advised Petitioner it would be unable to pay for the two new trucks and it did not pay for them until it misappropriated the funds from the sale of the Cementos Nacionales trucks. Having discovered that the two new trucks were missing from the dealership on October 2, 1989, MFC requested immediate payment for those trucks and that request was met with the offer of a postdated check but no guarantee was stated as to the date upon which that check would clear in extinguishing the debt for the two trucks. This eventuated in the request from Petitioner to Respondent to have the Respondent surrender possession of the truck inventory under financing by MFC. Respondent, having refused to surrender those items on October 2, 1989, Petitioner obtained a Writ of Replevin which was served on the distributorship on October 5, 1989. At that time, Petitioner took position of the new and used truck inventory in accordance with the collateral security provisions set forth in the Floor Plan Financing Agreement. Petitioner left Respondent with the parts inventory. In pursuing the Writ of Replevin, Petitioner had in mind the existence of the tax lien to the State of Florida, delinquencies associated with the parts account and capital loan, the out of trust situation with the two trucks which have been mentioned and Respondent's previous history concerning delinquent payment for trucks which Respondent sold. From that point forward sales to the Respondent by Mack and MFC associated with parts and new vehicles has been on a C.O.D. basis. On December 11, 1989, Petitioner gave notice of termination to Respondent. The basis for the termination concerns defaults in the payment obligations from Respondent to Petitioner associated with floor plan indebtedness, parts account indebtedness, capital loan account indebtedness, and in particular the failure to make payment for the Cementos Nacionales trucks. That termination notice was in accordance with and authorized by paragraphs 22e(1) and 25(D)(1) of the Distributor Agreements between the Petitioner and Respondent that had been entered into on March 26, 1985. In addition to concerns about the viability of the Respondent, Petitioner had concerns of its own associated with its financial position. Petitioner had lost $185,000,000 in the calendar year 1989. It caused the Petitioner to be more cautious in its financial dealings to include the business conducted with its distributors. Paul Ritter, a Senior Vice President of Sales with Petitioner, made the decision to terminate. He had adequate cause for the termination. Respondent's attempts to minimize the significance of its shortcomings that led Petitioner to take the action calling for termination and to ascribe motives to the Petitioner which Respondent deems to be a matter of pretext are unavailing. As to the latter, pursuant to Section 320.641(3), Florida Statutes, Respondent alleges that the reason for termination is unfair and that Petitioner took the action of termination as part of Petitioner's attempt to interfere with the export business which Respondent conducted and as an overall pattern of discriminatory treatment of Respondent by Petitioner that would include threats and intimidation directed from Petitioner to Respondent. Although the Distributor Agreements did not prohibit sales in the international market, Petitioner regarded this as contrary to its policy and adverse to Mack International, a subsidiary to the Petitioner which conducted sales in the international market place. Mr. Martinez made known to the Petitioner that he intended to conduct sales in the international market place at the inception of his franchise. Indeed, in the history of the franchise approximately a third of the sales were in the international market place. Petitioner was not pleased with these activities and monitored them over time. Respondent, through the knowledge of its principal officer, Mr. Martinez, was conversant with the truck business in Central and South America where it conducted sales. One of the reasons for Petitioner's concern about the sales activities by Respondent in the international market place was the adverse economic impact that would occur to Mack International in that the price structure by Respondent was cheaper than that of Mack International. Petitioner requested Respondent to stop doing business in the international market place and tried to discourage Respondent's customers from buying from Respondent in the international market place. Petitioner even went so far as to tell the Respondent that these activities might jeopardize the franchise. In spite of this friction over sales activities in the international market place, the facts presented do not lead to the conclusion that Petitioner's resistance to Respondent's sales activities in that market lead to the inability to meet debt obligations referred to before or that Petitioner used the nonpayment of those debt obligations as a ruse for terminating Respondent when Respondent's activities in the international market place was the true reason for termination. Likewise, although Petitioner was not pleased with some of the sales activities by Respondent outside of its domestic territory in territories of other domestic dealers, this was not the reason for terminating the distributorship. Nor did the Petitioner terminate the Respondent's dealership based upon a disagreement over the distribution of sales effort discounts for sales to out of territory customers. Over the history of the franchise, Respondent sold approximately one third of its vehicles in domestic territory not specifically assigned to it, and which it was allowed to do. Petitioner became aware in 1989 that Respondent had taken on the sale of Western Star Trucks which competed with sales of Petitioner's product and it also had undertaken the sale of U.D. (Nissan) vehicles. This was a matter of concern to the Petitioner, but did not influence its decision to terminate Respondent's franchise for failure to honor financial obligations. Any suggestion by Respondent that the basis for termination was related to ethnic discrimination against Hispanics is rejected.
Recommendation Based upon the consideration of the facts found and the conclusions of law reached, it is, RECOMMENDED: That a Final Order be entered which upholds the decision to terminate/cancel Respondent's franchise. DONE and ENTERED this 10th day of July, 1991, in Tallahassee, Florida. CHARLES C. ADAMS, 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 10th day of July, 1991. APPENDIX TO RECOMMENDED ORDER The following discussion is given concerning the fact proposals of the parties. Petitioner's Facts Paragraph 8 is not necessary to the resolution of the dispute. Paragraph 24 is a incorrect portrayal of the transcript pages cited to. Paragraph 26 is not necessary to the resolution of the dispute. Paragraph 41 is rejected. Paragraph 42 is rejected with the exception of the reference to placement on C.O.D. on September 20, 1989. Paragraph 65 is not necessary to the resolution of the dispute. The last sentence of Paragraph 87 is not necessary to the resolution of the dispute. Respondent's Facts Paragraph 3 is not necessary to the resolution of the dispute. In Paragraph 10 the impression of one witness concerning what another witness thought is rejected. Paragraphs 18 through 26 are not necessary to the resolution of the dispute. Paragraph 27 is rejected in that aspect which attempts to report one witness's impression of the attitude of another witness concerning mental state. Paragraph 38 is rejected. Paragraph 39 is not necessary to the resolution of the dispute. Concerning Paragraph 41, the agreements between the parties did not require that Respondent be made aware of the Petitioner's choices before those choices were carried out. Paragraphs 43 and 44, see above. The matters set forth in Paragraph 45 do not excuse Respondent's nonpayment. Paragraph 52 is rejected. Paragraph 53 constitutes argument. Paragraphs 57 and 58 are not necessary to the resolution of the dispute. Paragraph 59 is rejected as is Paragraph 62. Paragraph 66 is accepted but it does not lead to a different result in the case. Paragraphs 67 and 68 are irrelevant. Paragraph 69 is rejected in the last sentence. Concerning Paragraph 70, the change in policy of September 29, 1989 did not relate to existing inventory but it did relate to inventory to be gained beyond that point, to include used inventory. As to Paragraph 71 it can be inferred that the used truck floor plan was affected by the September 20, 1989 decision, especially given existing problems with used truck inventory. As to Paragraph 72 it is accepted but the choice of placement on C.O.D. was justified. Paragraph 73 is not necessary to the resolution of the dispute. As to Paragraph 74 the suggestion that the parts account was current is rejected. The balance of the paragraph is accepted. As to Paragraphs 77 and 78 this is not an accurate statement of the present case. Paragraph 79 is rejected. Paragraph 81 is accepted but it is not sufficient to cover the two out of trust sales which amounted to $102,000, more importantly, Respondent owed Petitioner for the two new trucks aside from the attempt to floor plan the five units as a means of paying for the two new trucks. Paragraph 82 is rejected. Paragraphs 83 and 84 are accepted. Paragraph 85 is rejected. As to Paragraph 86, see discussion for Paragraph 81. Paragraph 90 is accepted but does not change the outcome. Paragraph 91, see above. Paragraph 92 is irrelevant. Paragraph 93 is rejected. Paragraphs 94 and 95 are accepted. Paragraph 98 is accepted but does not change the outcome. Paragraph 99 is accepted. Paragraph 101 is accepted with the exception of the value of receivables and value of used truck inventory which is rejected. Paragraph 103 is rejected in that the parts were not taken. Paragraphs 104 and 105 are irrelevant. Paragraph 106 is accepted. Paragraphs 109 and 110 are accepted. Paragraph 111 is rejected. Paragraph 115 is irrelevant. That portion of Paragraph 116 attributable to the position of the Associates is rejected as hearsay. Paragraph 118 is irrelevant. Paragraphs 119 through 123 are not necessary to the resolution of the dispute. Paragraph 128 is rejected. Paragraph 129 is accepted as is Paragraph 131. Paragraphs 132 through 134 are irrelevant. Paragraph 136 is irrelevant. Paragraph 137 does not establish ethnic discrimination as a basis for termination. Paragraphs 138 and 139 are rejected. Concerning Paragraph 140, the December 11, 1989 letter constituted notice of termination. Paragraphs 141 and 142 are irrelevant. The balance of the suggested fact finding by the Petitioner and Respondent is subordinate to facts found in the Recommended Order. COPIES FURNISHED: Dean Bunch, Esq. Robert L. Hessman, Esq. RUMBERGER, KIRK, ET AL. 106 E. College Avenue, Suite 700 Tallahassee, FL 32301 Roy Cohn, Esq. GIBBONS, SMITH, COHN & ARNETT 501 E. Kennedy Boulevard, Suite 906 Tampa, FL 33602 Irwin J. Weiner, Esq. 50 S.E. First Avenue Ocala, FL 32671 Scott R. Corbett, Esq. 550 N. Bumby Avenue, Suite 280 Orlando, FL 32803 Michael J. Alderman, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, FL 32399-0500 Charles J. Brantley, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room B439 Tallahassee, FL 32399-0500
The Issue Whether Janet Hurst (Respondent), as a licensed residential real estate broker, should be subject to disciplinary action by the Department of Business and Professional Regulation, Division of Real Estate (Petitioner), for failure to direct, control, or manage a sales associate in her employ, in violation of Section 475.25(1)(u), Florida Statutes.1/ Whether Respondent, as a licensed residential real estate broker, should be subject to disciplinary action by Petitioner for fraud, misrepresentation, concealment, false promises, false pretences, dishonest conduct, culpable negligence, or breach of trust in any business transaction, in violation of Section 475.25(1)(b), Florida Statutes.
Findings Of Fact Petitioner is the licensing authority for real estate brokers in Florida, with revocation and disciplinary authority over its licensees pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes. Respondent is, and at all material times was, a licensed Florida real estate broker who operated a real estate brokerage named Lake DeFuniak Realty, Inc. Carol Rosell was first licensed as a real estate sales associate in Florida in February or March, 2005, and began her first employment in that capacity in April 2005, at Lake DeFuniak Realty, Inc. Although a newly-licensed real estate sales associate, Carol Rosell was not unsophisticated in financial matters, having been involved in the banking industry for over 20 years prior to becoming licensed as a real estate sales associate. In 2005, Carol Rosell sold over one million dollars in real estate through Lake DeFuniak Realty, Inc., and earned over $60,000 in real estate commissions. On December 23, 2005, Carol Rosell placed a telephone call to her first cousin in New Jersey, Richard Rosell, and advised him of two parcels of adjacent land on Kings Lake Road near DeFuniak Springs that were for sale. Both Mr. Rosell and his wife, Darlene Rosell, considered the purchase and, after the holidays, advised Carol Rosell that they wanted to purchase one of the parcels. Carol Rosell, who was the listing agent for the sellers of the property through Lake DeFuniak Realty, Inc., advised that the two parcels were to be sold together. Richard and Darlene Rosell decided to purchase both parcels (collectively, "the Property"). Although they intended to visit the Property before closing, the Rosells decided to close on the purchase without viewing the Property. They paid $182,900 for the Property. After purchasing the Property, Richard and Darlene Rosell visited the Property in February, 2006, and shortly thereafter decided to sell the Property. According to Darlene Rosell, during that visit, they also met with county officials who indicated that, contrary to the way the Property was advertised, the Rosell's rights in the Property did not include lake access. On February 23, 2006, Richard and Darlene Rosell, as sellers, entered into a written listing agreement (Listing Agreement) giving Lake DeFuniak Realty, Inc., the exclusive right to sell the Property. The Listing Agreement listed Carol Rosell as the listing associate and provides that "[t]he property is offered for sale on the following terms ($199,500.00), or on other terms acceptable to Seller." The Listing Agreement does not address how price changes are to be authorized by the sellers. According to the Emerald Coast multiple real estate listing (MLS) printout for the Property, after the Rosells entered into the Listing Agreement on February 23, 2006, the MLS listing price for the Property was originally set at $199,500. Contrary to the allegations of the Administrative Complaint, the price change for the Property reflected on the MLS printout shows that on March 3, 2006, the price change was from $199,500 to $299,500, as opposed to $239,500 as alleged in the Administrative Complaint. The evidence further shows that it was Respondent, not Carol Rosell, who made entry in the MLS listing to increase the price to $299,500 on May 3, 2006. Real estate agents and sales associates obtain access to the MLS system through a member broker. In this case, both Carol Rosell and Respondent were signed up for MLS access during the pertinent time through Lake DeFuniak Realty, Inc. When signing up, each associate or agent is assigned a unique access code which identifies the agent and given a password to access the MLS system. Once they access the system under their unique access codes and passwords, agents and sales associates can make changes to the MLS list price or note certain other changes in the listing. Changes made by those who access the system show up on the MLS listing history along with the access code of the agent who made the change. Real estate agents and sales associates are prohibited from sharing their passwords, and are subjected to fines if they do. Respondent's access code to the MLS system during the pertinent period was E1705. Carol Rosell's access code was E5619. Entries in the MLS history report for the Property show that Carol Rosell was the listing agent from the time that the Rosells purchased the Property until they sold it. A review of the March 3, 2006, change in the MLS listing price for the Property from $199,500 to $299,500, on the MLS history report shows that Respondent, as opposed to Carol Rosell, was the one who accessed the MLS system and made the change on that date under Respondent's access code number E1705. Respondent testified that she accessed the MLS system and increased the MLS listing price of the Property to $299,500 on March 3, 2006, only after she had spoken to Carol Rosell and someone on the telephone identified by Carol Rosell as Darlene Rosell to confirm that the change in the price was authorized. Respondent further explained that she had previously asked Carol Rosell to obtain permission from the sellers, Richard and Darlene Rosell, for the price increase. Respondent said, after she discovered that the Rosells wanted to sell the Property, she did some research regarding the zoning and recommended the price increase for the Property based upon her discovery of a similar-sized parcel listed for $299,000 with the same development potential just one-tenth of a mile away from the Property. The only change in the MLS listing price for the Property under Respondent's access code E1705 was the increase to $299,500 made on March 3, 2006. After that, the only changes in the MLS listing price for the Property while the Rosells had it listed with Lake DeFuniak Realty, Inc., were made under Carol Rosell's access code number E5619, including a decrease to $199,500 and then increase back to $299,500 on April 18, 2006; a decrease to $199,500, and then an increase to $259,500 on May 1, 2006; and a decrease to $239,000 on July 18, 2006. The evidence demonstrated that the price was increased to $299,500, as opposed to $239,500 on March 3, 2006, and that the change on that date was made by Respondent, as opposed to Carol Rosell as erroneously alleged in the Administrative Complaint. Nevertheless, in her settlement stipulation with Petitioner, Carol Rosell "admits the factual allegations in all counts of the Administrative Complaint and that such allegations constitute a violation(s) of the count(s)."2/ Under the terms of her settlement stipulation with Petitioner, Carol Rosell's real estate license was placed on probation for a period of one year, and Carol Rosell agreed to pay costs in the amount of $264, and agreed to pay a fine in the sum of $500. Petitioner, however, waived the fine imposed against Carol Rosell, and she agreed to testify in this proceeding on behalf of Petitioner. In further contravention of the Administrative Complaint and the plain terms of the settlement stipulation with Petitioner's main witness, Carol Rosell, Petitioner's counsel stated during his opening at the final hearing that it was Respondent who changed the price of the Property "as part of a scheme to make an illegal profit," and that Carol Rosell "never changed the price." There is no mention in the Administrative Complaint of a scheme to make an illegal profit and the evidence produced at final hearing does not support such a finding, nor does it support a finding that Carol Rosell never changed the MLS listing price of the Property. At the final hearing, Carol Rosell testified that she did not recall making any of the changes to the MLS listing price. Carol Rosell attempted to explain the fact that her access code appears next to numerous MLS listing price or other changes made to the Property's MLS listing by testifying that she may have left her MLS access code and password on Respondent's computer at a time when she had to share a computer with Respondent, and that Respondent may have used them in making the price changes. Carol Rosell's testimony was refuted by a number of former employees of Lake DeFuniak Realty, Inc., who explained that Carol Rosell never had to share a computer, and that all agents knew not to give out their passwords to the MLS system. In addition, during cross-examination, while Carol Rosell testified that she did not "recall changing prices like that," she did not deny it. Further, in apparent contradiction of her earlier testimony, Carol Rosell remembered "changing the price back to one ninety-nine five," and testified that she had no proof that Respondent was the one who changed the prices. In view of Carol Rosell's settlement stipulation, the documentary evidence of the use of her access code on numerous occasions, her inconsistent testimony, and the credible testimony of other witnesses regarding passwords and whether she shared a computer, it is found that, other than the change made by Respondent on May 3, 2006, increasing the price to $299,500, all of the other price and listing changes to the MLS listing for the Property made during the time that the Rosells owned the Property were made by Carol Rosell. While not mentioned in the Administrative Complaint, Petitioner, through the testimony of Carol Rosell, attempted to show that Respondent changed the listing price of the Property to make an illegal profit. Carol Rosell testified that Respondent told her that she had a verbal contract with Charles "Chuck" Christian and that there was a secret deal with him to inflate the reported sales price of the property and the profit would be split among Respondent, Mr. Christian, and Carol Rosell. Carol Rosell's testimony regarding the alleged transaction, however, was not credible. At the final hearing, the exchange between Petitioner's counsel and Carol Rosell regarding that alleged secret deal was as follows: Q. [MR. SOLLA]. Did you enter into a listing agreement on behalf of DeFuniak Springs Realty with Darlene Rosell and her husband? A. [CAROL ROSELL]. Yes I did. Q. And what was the listing price in that agreement? A. At the time, it was one ninety-nine five ($199,500). Q. Okay. Did there come a time when the price changed? A. Yes. Q. How did that happen? How did it arise? A. The first price change was done by Janet Hurst, the initial price change. And at the time, I didn't know it was being done. After the fact, she indicated that she had changed it because of interest that she had from individuals, investors, out of south Florida who were concerned about the price at one ninety-nine five ($199,500). They felt that it was too low, and they were concerned that there were problems with the property. Q. Did she explain to you at some point that she intended for the buyer to resell the property and to profit? A. Later on yes, we had that discussion. She told me that, essentially, buy low, sell high. She said that she had somebody that was interested in the property, that they were going to purchase it on paper for the one ninety-nine five ($199,500). And I'm not sure of the exact amount. It was one ninety-nine or one ninety-five. And then they were going to turn around and flip it and sell it for two ninety-nine or three fifty. And again, I can't remember exactly what the initial amount was, but they were going to sell it for a higher price. Q. So raising the listing price would make it appear that the property was worth more? MS. SPEARS: Objection, Your Honor, he's leading his own. THE COURT: I'll sustain that objection. BY MR. SOLLA: Q. Why would they raise the listing price? Why would Janet Hurst raise the listing price A. She told me that this way it looked like they were paying more for the property, so when they sold it for more than the listing price, they were showing a profit that they were making, and it looked better for business purposes. Those weren't her exact words, but that was what she was saying. Q. And did she agree to share some of that profit with you? A. She did. Initially, she said that we would split it three ways, and she went cha ching, cha ching. And then she said, well, I can't give you - - I can't split it because you're a realtor. I can give you a bonus. And that's how it was left. Q. Did you let Darlene Rosell know that the price had been changed? A. I honestly don't remember if I did initially. I know we had that conversation, I'm going to say, about a week after the price - - after I realized it had been done. And I called Darlene. Because at the time, we had a verbal contract with - - or Janet had a verbal contract with an individual. And the way it was presented to me was that he was going to pay the one ninety-nine - - he was going to pay two ninety-nine ($299,000) for it, and he was going to sell it and flip it. And I remember saying to her, that's great, they'll be happy. They're going to get more than they even asked for it. And then she explained to me that they weren't going to get that price, they would still get the amount that they had listed it for, but the other individual was going to show that it was more than what he was paying for it so that he could sell it. Aside from the rambling, convoluted nature of the testimony, there are other reasons to question its credibility. At the final hearing, Mr. Christian took the witness stand and denied the alleged scheme. Respondent also denied it, and the credible testimony of Respondent's former employees indicated that Lake DeFuniak Realty, Inc., was not involved in "flipping" property. In addition, the alleged scheme is illogical. It is unlikely that Respondent would tell Carol Rosell that she planned to make an illegal profit from the proceeds of a sale from property owned by Carol Rosell's relatives. Carol Rosell testified that she would not do anything illegal. Carol Rosell also testified that she told Darlene Rosell of all the details of the verbal agreement, and yet, later, Darlene Rosell and her husband entered into a contract with Mr. Christian's company. These factors, together with Carol Rosell's lack of clear recall of prices or the timing of her revelation of the price changes to Darlene Rosell, as well as the fact that Carol Rosell was required to testify against Respondent in exchange for a favorable settlement stipulation with Petitioner, make Carol Rosell's testimony regarding the alleged scheme untrustworthy. Therefore, in addition to the fact that the alleged scheme is beyond the pleadings of the Administrative Complaint, it is found that Petitioner failed to show that Respondent changed the price of the Property as part of an alleged scheme to make an illegal profit. Moreover, it is further found that Petitioner failed to provide evidence of any incentive for Respondent to change the MLS listing. The only credible explanation for the price change to $299,000 on March 3, 2006, was provided by Respondent when she explained that she made the change for the benefit of the sellers to better reflect a nearby comparative listing. Finally, it is alleged that Respondent concealed from the sellers the fact that the listing price for the Property was changed. For this allegation, Petitioner relies upon the testimony of Carol Rosell, as well as the testimony of Darlene Rosell. Carol Rosell's testimony in this regard does not support a finding that the price change was concealed from the sellers. When asked when she advised Darlene Rosell of the first price change, Carol Rosell testified, "I honestly don't remember if I did initially. I know we had that conversation, I'm going to say, about a week after the price - - after I realized it had been done." In fact, Carol Rosell's indefinite testimony could arguably support a finding that she "initially" told the sellers of the price change. Darlene Rosell testified at the final hearing that she was not advised of the March 3, 2006, price change until April, 2006, when Carol Rosell called and told her that "the broker" had changed the price to $239,000. In contrast, according to Respondent, once she had decided that the sales price listed for the Property was too low, but before changing the MLS listing price, she asked Carol Rosell to find the contact numbers for the sellers. Respondent testified that Carol Rosell then came into Respondent's office with a telephone to her ear and then handed it to Respondent, explaining that Darlene Rosell was on the phone. Respondent further testified that, during that telephone conversation, she discussed with the person identified as Darlene Rosell that she would try listing the Property at a higher price and then go down if it was not selling. Then, according to Respondent, she asked Carol Rosell to get written confirmation of the sellers' price change authorization by having Darlene Rosell fax something into the office. While Respondent introduced a copy of the Listing Agreement that apparently had been faxed from Lake DeFuniak Realty, Inc., with changes to the listing price, only the original date of the listing agreement, as opposed to the date of the price change authorization, is evident on the copy provided, and thus no weight is given to the document. While Respondent did not introduce reliable evidence of written authorization from Darlene Rosell, Respondent recalled that Carol Rosell provided written proof of Darlene Rosell's authorization at the time Respondent made the change on March 3, 2006. In addition, there is evidence that Carol Rosell often did not keep up with her work files at office, and that the file Carol Rosell assembled for the Property in the possession of Lake DeFuniak Realty, Inc., was incomplete. Even without written confirmation, Respondent's version is the only credible version of the facts under the circumstances, and Respondent's testimony that she informed someone identified as Darlene Rosell of the fact that she intended to make the price change on the Property is credited. Even without Respondent's testimony, Carol Rosell's equivocal testimony that she does not recall "initially" contacting the sellers about the price change is inadequate evidence to show that there was a delay between Respondent's change of the price on March 3, 2006, and the sellers' receipt of information informing them of the price change. Moreover, it is clear that the sellers were contacted within weeks of the March 3, 2006, price change. Petitioner produced no evidence, through expert testimony or otherwise, indicating that a week or so delay in informing a client of a MLS listing price change would constitute a violation of a Florida real estate license standard. Although Carol Rosell testified that Respondent was sometimes hard to reach or unavailable to answer questions that Carol Rosell may have had regarding her duties, the evidence was insufficient to show that Respondent did not properly direct, control, or manage Carol Rosell while she was a sales associate with Lake DeFuniak Realty, Inc. In fact, with regard to the Property, the evidence indicates that Respondent went out of her way to help Carol Rosell with the listing for the Property by making recommendations for a price increase based upon Respondent's independent investigation. Moreover, contrary to the testimony of Carol Rosell, the credible testimony of Respondent and former employees of Lake DeFuniak Realty, Inc., demonstrated that Respondent offered continued education and provided mentoring to sales associates, all of whom worked with Lake DeFuniak Realty, Inc., as independent contractors. In sum, Petitioner did not prove that Respondent failed to appropriately direct, control or manage a sales associate, or that Respondent concealed the change of the listing price of the Property from the sellers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Real Estate, enter a Final Order dismissing the Administrative Complaint. DONE AND ENTERED this 29th day of October, 2010, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of October, 2010.
Findings Of Fact American Asphalt, Inc., a bidder fully qualified to bid on this project, did not include a printed hard copy (paper copy) along with its bid diskettes when it timely submitted its bid on State Project No. 92130-3423 before 10:30 a.m. on July 28, 1993. (Prehearing Stipulation) The bid blank included with this bid (Exhibit R8) showed on the front of the document the total amount of the bid as $2,526,335.16 which is $201,662.70 below the next lowest bid. However, the various items to be included in the bid which totalled the amount shown on the front were left blank on Exhibit R8. A hard copy run from the bid diskette included with the bid package was filed with the Department at 10:38 a.m. on July 28, 1993, eight minutes after the deadline for bid submissions, and a copy was admitted into evidence as Exhibit P1. The total of the items listed on Exhibit P1 and on the diskette is $2,526,335.16, the same as shown on the front page of Exhibit R8 timely submitted with the bid. In October 1988, the Department instituted Contract Electronic Bidding (CEB) where the Department supplies bid proposal forms and a computer diskette designed to operate on IBM personal computers or IBM compatible computers. The only entries into the CEB program by the bidder that are permitted are the company name, vendor number, base codes, reason code, addendum number, and the unit or lump sum prices for items that must be bid in order to produce an official bid item list (Exhibit R2 Section 2-2). The CEB program is intended to simplify the bidding process for both the Department and bidder. Changes made in unit prices while using this program are immediately reflected in the overall bid. Diskette Bidding Instructions (Exhibit R6) was received by Petitioner with its bid package. Item 1 under instructions for submission of computer generated bids provides: The printed hard copy returned form (sic) contractor is the only acceptable bid and must be accompanied by the diskette from which it was printed. Supplemental Specifications (Exhibit R4) which accompanied the standard bid specifications submitted with the bid package provides in pertinent part: The computer-generated bid item sheets that are submitted must be printed from the diskette that is returned. When a diskette other than the one furnished by the Department is utilized to generate the official bid, the diskette submitted must have a label attached indicating the Contractor's Name, Vendor Number, Letting Date, Revision Date (if applicable) and the State Project Number. When a bid is submitted with hard copy but without a diskette or a diskette unreadable or containing a virus, the Department prepares a diskette from the hard copy which can be entered into the Department's mainframe computer. Last minute changes to a bid may be made by the bidder on the hard copy by interlining or whiting out the changed figure and writing in the new figure which must be initialled by the bidder. When such an altered bid is received, both of the Department's first and second checkers of the bid initial the change. Because the bid submitted by Petitioner did not contain a completed hard copy at the time specified for bid opening the Technical Review Committee voted unanimously and the Contract Awards Committee voted two to one to recommend the apparent low bid submitted by American Asphalt, Inc. be declared irregular for failure to turn in a completed computer generated bid item sheet with their bid package; and that the bid be awarded to the next lowest bidder (Exhibit R9 and R10). Item 3-1 of the standard bid specification (Exhibit R3) provides in pertinent part: Until the actual award of the contract, however, the right will be reserved to reject any and all proposals and to waive technical errors as may be deemed best for the interest of the State.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That a final order be entered rejecting American Asphalt, Inc.'s challenge to the award of State Project No. 92130-3423 to Hubbard Construction Company. DONE AND RECOMMENDED this 2nd day of December, 1993, in Tallahassee, Leon County, Florida. K. N. AYERS 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 2nd day of December, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-5855BID Petitioner's proposed findings are accepted except: 15. Rejected. See Hearing Officer Conclusion of Law #20.-21. 17. Rejected. See Hearing Officer Conclusion of Law #22. Respondent's proposed findings are accepted. COPIES FURNISHED: Charles G. Gardner Assistant General Counsel Department of Transportation 605 Suwannee Street Tallahassee, Florida 32399-0450 James W. Anderson, Esquire SAVLOV & ANDERSON, P.A. Post Office Drawer 870 Tallahassee, Florida 32302 Ben G. Watts, Secretary Attn: Eleanor F. Turner, Mail Station #58 Department of Transportation Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0458 Thornton J. Williams, General Counsel Department of Transportation 562 Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0458
The Issue The petition that initiated this proceeding challenged the taxes, interest, and penalties assessed against Petitioner by Respondent following an audit and identified the following four issues: Issue One. Does the sale of obsolete games at the "annual game sale" qualify for exemption from sales tax as an occasional or isolated sale? Issue Two. Are the purchases of video games exempt from Florida sales and use tax as sales for resales? Issue Three. Are the purchases of plush exempt from Florida sales and use tax as sales for resale or, alternatively, does taxation of the vending revenues and taxation of purchases of plush represent an inequitable double taxation? Issue Four. Should penalties be assessed based upon the facts and circumstances [of this proceeding].
Findings Of Fact Petitioner is an Illinois Corporation headquartered in Texas and licensed to do business in Florida. Petitioner owns and operates video and arcade game amusement centers, hereafter referred to as centers. Petitioner sells to center customers the opportunity to play the games in the centers. Petitioner purchases the games from sources outside itself; it does not manufacture the games it makes available in its centers. Petitioner paid sales tax upon the purchase of machines purchased in Florida and use tax upon the purchase of machines outside Florida and imported for use inside Florida. The Florida Department of Revenue (DOR) is the State of Florida agency charged with the enforcement of Chapter 212, Florida Statutes, Tax on Sales, Use and Other Transactions, the Transit Surtax, and the Infrastructure Surtax -- the state and local taxes at issue in this case. The DOR audited Petitioner for the period December 1, 1986 through November 30, 1991, hereafter referred to as the audit period. During the audit period, Petitioner operated 12 centers in the State of Florida. For purposes of the instant litigation, references to the centers will mean only the centers located in Florida. The audit determined that Petitioner owed $51,593.37 in sales and use tax, $440.81 in transit surtax, and $1,459.80 in infrastructure surtax. Each of the sums assessed included penalty and interest accrued as of September 13, 1994. In accordance with section 120.575(3), Florida Statutes, Petitioner paid $32,280 as follows: a. sales and use tax $22,411 b. interest 8,575 c. charter transit surtax 234 d. interest 64 e. infrastructure surtax 750 f. interest 246 The centers make available three types of games. The games are activated either by a coin or a token that is purchased at the center. Video games include pinball machines and electronic games which do not dispense coupons, tickets or prizes. Redemption games include skeeball, hoop shot and water race which dispense coupons or tickets which the player earns according to his or her skill. Merchandise games include electronic cranes which the operator or player maneuvers to retrieve a prize directly from the machine. Merchandise games do not dispense coupons or tickets. The tickets earned in the course of playing redemption games can be exchanged for prizes displayed at the centers. The prizes obtained directly from the merchandise games and exchanged following receipt from redemption games are termed "plush." Plush may be obtained only by seizing it in a redemption game or by redeeming coupons earned during the play of redemption games; it may not be purchased directly for cash. A merchandise game does not dispense an item of plush upon the insertion of a coin or token and activation of the crane's arm -- acquisition of plush requires a certain level of skill on the player's part. A redemption game does not dispense an item of plush upon the insertion of a coin or token and the push of a button -- acquisition of tickets requires a certain level of sill on the player's part. Petitioner purchases plush in bulk and distributes it to the various centers. Each of the centers sells some of its games to individual buyers. Petitioner's headquarters coordinates the sale. For each of the years in the audit period, the centers sold games at various dates. Petitioner characterizes as its "annual sale" the period November 1 through January 10 when most of the sales took place. The specific dates for the sales that took place during the audit period follow; numbers in square brackets indicate the number of sales on a particular date if there is more than one. a. December 1986 through July 1987 -- no information available -- but more than one sale was made during this time. b. November 1987: 2, 5, 7, 10, 17, 18[2], 20, 22, 25, 28[3] c. December 1987: 2, 4, 7, 15, 18, 23 d. November 1988: 4, 5, 7[2], 9, 10, 11, 17, 18, 20[2], 21[2], 25, 26, 28, 29 e. December 1988: 6, 7, 8, 10[2], 12[2], 16, 21, 22, 23[2], 24 f. January 1989: 3, 6, 7[4], 9, 12 g. November 1989: 6, 15, 16[2], 20 h. December 1989: 1, 6, 10, 22, 29[3], 31 January 1990: 26 March 1990: 26 April 1990: 26 l. June 1990: 12 m. November 1990: 3, 9, 13[2], 14, 16, 19, 24, 26 n. December 1990: 1, 2, 7, 20 January 1991: 8 May 1991: at least 1 q. November 1991: 4, 9, 10, 14, 15, 21 Petitioner did not provide its machine vendors resale certificates upon Petitioner's purchase of the games. Petitioner did not provide its plush vendors resale certificates upon Petitioner's purchase of plush. Petitioner did not apply for a refund of sales tax paid upon its purchase of games in Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order that adopts the findings of fact and the conclusions of law contained herein. The assessments against Petitioner should be sustained to the extent the assessments are consistent with the findings of fact and the conclusions of law contained in this Recommended Order. DONE AND ENTERED this 28th day of June, 1996, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON, 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 28th day of June, 1996.
The Issue Whether Respondent, Department of Corrections' ("Department") intended decision to award contracts to Intervenors, Gateway Foundation, Inc. ("Gateway"), and The Unlimited Path, Inc. ("UPI"), for licensed in-prison substance abuse treatment services pursuant to Invitation to Negotiate FDC ITN 17-112 ("the ITN"), is contrary to the Department's governing statutes, rules, or the ITN specifications, and contrary to competition, clearly erroneous, arbitrary, or capricious.
Findings Of Fact The ITN, Site Visits, and Addenda The Department is a state agency responsible for the supervisory and protective care, custody, and control of all inmates incarcerated by the Department in each of its four regions. As of June 30, 2016, the Department had a total inmate population of 99,119, with 62 percent (61,454) of those inmates in need of treatment for a substance abuse disorder. The Department wants to strategically improve the manner in which it provides licensed substance abuse treatment services to inmates by focusing on maximizing the levels of treatment and individual inmate needs without increasing costs. The Department chose to utilize a flexible competitive procurement process to achieve its goals; specifically, an invitation to negotiate method of procurement rather than an invitation to bid or request for proposals, because it wanted industry leaders to craft individual and innovative solutions to address the problem.1/ Against this backdrop, on September 21, 2016, the Department issued the ITN, "In-Prison Substance Abuse Treatment Services," seeking replies from qualified vendors to provide licensed substance abuse treatment services to inmates incarcerated by the Department in each of its four regions. The Department reserved the right to make separate awards to each of its four regions, or to make a statewide award to a single vendor. The initial term of the contract(s) to be awarded under the ITN is five years. In addition, the Department may renew the contract(s) for up to one additional five-year term. The ITN separated substance abuse treatment services into five distinct service types: Prevention Services, Outpatient Substance Abuse Treatment, Intensive Outpatient Substance Abuse Treatment, Long-term Residential Therapeutic Community, and Aftercare. Additional services were also required, including motivation/readiness classes for program participants awaiting admission to Outpatient, Intensive Outpatient, or Residential Therapeutic Community services, and an alumni support group for program participants who have completed treatment services. The ITN required that the treatment services be provided in programs licensed pursuant to Florida Administrative Code Chapter 65D-30. The ITN identified the selection criteria as follows: The focus of the negotiations will be on achieving the solution that provides the best value to the State based upon the "Selection Criteria" and satisfies the Department's primary goals as identified in this ITN. The Selection Criteria may include, but is not limited to, the following. Selection Criteria: Respondent's articulation of their solution and the ability of the solution to meet the requirements of this ITN and provide additional innovations. Respondent's experience in providing the services being procured and the skills of proposed staff relative to the proposed approach and offering. Respondent's Technical Reply and Cost Reply, as they relate to satisfying the primary goals of the services identified herein. All interested vendors, before submitting their replies, were required to visit various sites within the regions covered by their reply. GEO attended these site visits, which were held in October to November 2016. During the visits, the topic of the budget was discussed. All vendors were informed that the Department "did not have any new money," and that it would be operating within the existing budget. Section 4.10, TAB A, of the ITN required that each vendor submit with its reply a letter from a surety company or bonding agent that documents the vendor's present ability to obtain a performance bond or irrevocable letter of credit in the amount of $1,500,000, per region. In Section 4.8 of the ITN, Pass/Fail Mandatory Responsiveness Requirements, the Department stated it would reject any and all replies that did not meet the pass/fail criteria. One of these criteria, Section 4.8e), specifically required each vendor to demonstrate its ability to meet the performance bond requirement. A vendor was likewise required to make this certification on Attachment IV to the ITN, Pass/Fail Requirement Certification and Non-Collusion Certification. Section 4.8e) stated as follows: The Vendor must be able to demonstrate its ability to meet the Performance Bond requirements. Prior to execution of prospective contract, Respondent will deliver to the Department a Performance Bond or irrevocable letter of credit in the amount equal to the lesser of $1.5 million dollars, per region, or the average annual price of the Contract (averaged from the initial five year Contract term pricing). The bond or letter of credit will be used to guarantee at least satisfactory performance by Respondent throughout the term of the Contract (including renewal years). Section 5.36 of the ITN, Performance Guarantee, also provided: The Vendor shall furnish the Department with a Performance Guarantee in the amount of $1,500,000, per region, on an annual basis, for a time frame equal to the term of the Contract. The form of the guarantee shall be a bond, cashier's check, or money order made payable to the Department. The guarantee shall be furnished to the Contract Manager within thirty (30) days after execution of the Contract which may result from this ITN. No payments shall be made to the Vendor until the guarantee is in place and approved by the Department in writing. Upon renewal of the Contract, the Vendor shall provide proof that the performance guarantee has been renewed for the term of the Contract renewal. Based upon Vendor performance after the initial year of the Contract, the Department may, at the Department's sole discretion, reduce the amount of the bond for any single year of the Contract or for the remaining contract period, including the renewal. The purpose of a performance bond is to mitigate the Department's risk should a vendor fail to perform on a contract. In Addendum 2, the Department identified six current contracts being replaced by the ITN, and provided links to those contracts and budgetary information on the Florida Accountability Contract Tracking System ("FACTS").2/ The Department also provided two rounds of formal questions and answers, which are reflected in Addenda 6 and 7. In Addendum 6, question 3, a vendor asked a question about cost. In response, the Department answered as follows: Vendors are encouraged to submit a Cost Reply in such a manner as to offer the most cost effective and innovative solution for quality services and resources, as both cost efficiency and quality of services will be a consideration in determining best value. In Addendum 6, question 77, a vendor asked a question about how to submit a reply. In response, the Department answered as follows: Vendor's shall only submit one Reply, and the Reply must be clearly labeled with the Region(s) included, or that the Reply is Statewide. In Addendum 7, question 2, the Department again addressed the issue of how many replies are required of a vendor who was interested in either a statewide or a regional award, through the following questions and answers: Question 2: In the responses to vendor questions (Addendum 006), Change to No. 6- "4.9 Submission of Replies" states that "In Reply to this ITN, each Vendor shall: Submit a separate Reply for each Region (bullet item a on page 8). However, under answer #77 (p.21), it states that "Vendor's shall only submit one Reply, and the Reply must be clearly labeled with the Region(s) included, or that the Reply is Statewide." Can you please confirm that a statewide proposal can be one, single proposal for the entire state rather than four separate proposals for each of the four regions? Answer: Yes. If submitting for a Reply for Statewide, the Reply can be submitted as one (1) Reply. If submitting a Reply for multiple Regions such as Regions 1 and 2, a Reply must be submitted for each Region. A separate Technical Reply and Cost Reply must be included for each submission. The Cost Replies must be sealed in a separate envelope from the Technical Replies, but they can all be submitted in the same package. Submission and Evaluation of Replies to the ITN On June 15, 2017, the Department received replies to the ITN from the following six vendors: GEO, Gateway, UPI, SMA Behavioral Health Services, Inc., Village South, Inc., and Bridges of America, Inc. GEO submitted five separate replies, one for each region and one for statewide. Gateway submitted a single statewide reply, but indicated in the reply that it wanted to be considered for a statewide award and one or more regional awards. Gateway also included a detailed budget breakdown by region with pricing for each region. The Department's instructions to the evaluators of the replies included a note reminding them that Gateway submitted a statewide response, but that it wanted to be considered for each individual region. UPI submitted three separate replies, one each for Regions 1, 2, and 3. UPI made the required certifications regarding the performance guarantee and submitted a letter from a surety company evidencing its ability to obtain a performance bond in the amounts required by the ITN. All of the replies were deemed to satisfy the pass/fail criteria and were then evaluated and scored. Negotiations Following the evaluation of the replies, the Department entered into the negotiation phase with GEO, Gateway, UPI, and Bridges of America, Inc. Negotiations commenced in August 2017 and continued through October 2017. The Department held a total of three negotiation sessions with each of these vendors. The ITN provided that the scores from the evaluation phase would not carry over into negotiations and that the negotiation team was not bound by the scores. The Department's negotiation team consisted of Kasey Faulk, chief of the Bureau of Procurement (lead negotiator); Patrick Mahoney, chief of the Bureau of Readiness and Community Transition; and Maggie Agerton, the assistant chief of In-Prison Substance Treatment in the Bureau of Readiness and Community Transition. Ms. Faulk has a master's degree in business administration from the University of Florida. She is also a Florida-certified project management professional; Florida- certified contract negotiator; and Florida-certified contract manager. In her tenure as chief of the Bureau of Procurement, she has overseen more than 130 competitive solicitations, including at least 80 invitations to bid, at least 30 requests for proposals, and approximately 17 invitations to negotiate. She has drafted procurement procedures at two different state agencies, and helped draft revisions to Florida Administrative Code Chapter 68-1. Without objection, Ms. Faulk was accepted at hearing as an expert in the area of Florida procurement processes. Ms. Agerton authored the programmatic portions of the ITN and served as an evaluator. She has a bachelor's and master's degree in criminology. She is also a Florida-certified addiction professional and certified criminal justice addictions professional. She currently serves as contract manager for the Everglades Recovery Center ("Everglades") contract, of which GEO is the incumbent vendor.3/ During negotiations, GEO, which had only provided services to the Department for a short time, touted its experience and devotion of resources at Everglades. However, GEO was under a corrective action plan at Everglades as of May 12, 2017, because of missing information in clinical files and lack of staff supervision. Complete clinical files are very important to substance abuse treatment. Proper clinical documentation is necessary for licensure purposes and allows the Department to ensure that services are being provided in accordance with the contract. By the end of October 2017, Ms. Agerton had conducted a site visit to Everglades, and although GEO had made significant progress in the area of leadership and staff, the clinical files were still a significant problem. Ms. Agerton and Ms. Faulk had concerns about GEO's current contract performance at Everglades. During the negotiation phase, GEO was aware of the Department's concerns regarding its performance at Everglades. During negotiations, GEO was told by the Department that it is trying to spend its money more efficiently and in a cost-effective manner. GEO was told by the Department that its price was outside the range of competitive replies, and GEO was encouraged to provide alternative pricing models and "sharpen its pencils." During negotiations, the Department asked every vendor to identify its cost drivers. GEO did not identify the performance bond as a cost driver. However, UPI identified the performance bond as a cost driver. UPI informed the Department that a performance bond would cost it $200,000 per year regardless of whether the amount of the bond was reduced, because the cost of the bond is based on the complete value of the contract. UPI requested that it be allowed to submit a cashier's check to the Department in the amount of $1,000,000 for three regions in lieu of paying $200,000 per year for five years to a bonding company for a performance bond. At hearing, Ms. Faulk explained the process of negotiating with individual vendors, the importance of having a strategy, and the value of making individual concessions with individual vendors during negotiations. UPI had performed services for the Department for over ten years, through budget cuts, and had not walked away from their contracts. Accordingly, the negotiation team considered UPI's suggestion to be a low risk. That is, the Department did not believe there was a significant risk that UPI would abandon the contract. In any event, the cashier's check proposed by UPI would benefit the Department because the Department could easily take the money and use it to recoup losses in the event of nonperformance, as opposed to a bond, which may require the Department to engage in protracted litigation with a surety company to obtain the value of the bond. The Department also saw the cashier's check as an opportunity to obtain lower pricing from UPI. The negotiation team told UPI it would accept, in lieu of the performance bond, a $1,000,000 cashier's check if UPI was awarded three regions; a $750,000 cashier's check if UPI was awarded two regions; and a $500,000 cashier's check if UPI was awarded one region. Allowing UPI to post a cashier's check in the amount of $750,000 for the two regions it was awarded did not provide UPI with a competitive advantage over GEO. At hearing, GEO's representative, John Thurston, who oversaw the development of GEO's reply and BAFO, and participated in the negotiations, acknowledged that GEO's cost to obtain a performance bond in the amount of $1,500,000 would only have been $67,500 per year. During negotiations, the Department revised the scope of work. Following the negotiations, on October 25, 2017, the Department emailed an RBAFO to those vendors who participated in the negotiations. The RBAFO informed vendors that the term "Best and Final Offers" is used to provide the vendor the opportunity to clarify its response and adjust its price based on the negotiations, and that this does not preclude the Department from seeking clarification or additional information upon receipt of the BAFOs. The RBAFO further stated that the BAFO "must contain a written narrative of services to be provided inclusive of clarifications and any alternative or modifications discussed during the negotiation process." The BAFO required an executive summary, description of service delivery, a staffing matrix, and a price sheet. GPR-037 (General Program Requirements) in the RBAFO addressed staffing and provided, in pertinent part: The vendor shall ensure that all required Vendor staff positions are filled for the entire scheduled 40 hour weekly working period, and that those individuals are physically present at the work site. All positions are full-time, unless otherwise specified, inclusive of interim positions. As to the price sheet, the per diem pricing "should represent the best price the Vendor is willing to offer to the Department." The RBAFO specifically addressed and allowed for vendors to provide alternative pricing models and methods. Providing alternative price offerings gives the Department more options to solve its problem and demonstrates a vendor's understanding of the Department's needs. All vendors were provided with an equal opportunity to submit BAFOs reflecting revisions to the ITN made by the Department during negotiations. The RBAFO reminded vendors to include in their BAFOs alternatives or any modification discussed during the negotiation process. GEO was aware during negotiations that it could have inquired about or proposed to negotiate different components of all aspects of its proposal. GEO was also aware that any global changes for all vendors would be included in the RBAFO, but that negotiation concessions, innovative solutions, and negotiated points with individual vendors, would not be included. In fact, GEO negotiated items that were not shared with other vendors. The BAFOs and Negotiation Team Recommendation The deadline for vendors to submit their BAFOs was November 14, 2017. The Department received BAFOs from the four vendors invited to negotiate. The ITN provided that BAFOs would not be scored and the negotiation team would make a recommendation of award based on which vendor's solution presented the best value to the state, utilizing the selection criteria in the ITN. Prior to submitting its BAFO, the Department responded to Gateway's inquiries about differences between what was to be included in the BAFO and what was discussed during negotiations, specifically in the context of the ratio of Prevention Services counselors (indicated as one counselor to fifty participants in the RBAFO, but discussed during negotiations as one counselor to eighty participants). The Department instructed Gateway to use the ratios included in the RBAFO, and "provide an alternative price with the ratio your Company is proposing." As allowed by the RBAFO and further clarified by the Department, Gateway's BAFO included both a base price offering and an alternative price offering, with detailed explanations of the assumptions included within each offering. Gateway's BAFO included a ratio for Prevention Services counselors from one counselor for every fifty participants (1:50), and an alternative ratio of one counselor for every eighty participants (1:80). Gateway's staffing models in its BAFO also included part-time positions. The members of the negotiation team reviewed the BAFOs and then made a formal recommendation of award at a public meeting held on November 17, 2017, with recorded minutes. The negotiation team recommended regional awards rather than a statewide award. It recommended an award of Regions 1 and 2 to UPI and Regions 3 and 4 to Gateway. The team recommended these vendors because it believed their solutions represented the best value to the state based on the selection criteria identified in the ITN. Ms. Faulk recommended UPI for Regions 1 and 2 because UPI was an incumbent vendor with a long history of providing satisfactory services to the Department. Additionally, she felt UPI had tremendous ideas on how to maximize treatment, their cost was affordable, and they proposed innovative solutions. Ms. Faulk ultimately recommended Gateway's alternate price offering for Regions 3 and 4 because she found them very innovative and treatment-focused. She felt they had extensive experience in a correctional setting providing substance abuse treatment, and their cost was very affordable. She recommended the alternate price offering because it was an innovative solution to increase services. Gateway's alternate price offering increased the number of available treatment slots and provided staffing which the Department found acceptable and appropriate, while at the same time offering a better price. Ms. Agerton recommended UPI for Regions 1 and 2 because she felt UPI brought an innovative solution in negotiations, as well as many different ideas. She felt that based on their incumbent status, they had knowledge of the Department's systems and were able to suggest improvements while remaining affordable. Ms. Agerton recommended Gateway for Regions 3 and 4 because they also brought innovative solutions, particularly an evaluator that would help with monitoring their implementation. She also felt Gateway was likewise affordable and energetic. Neither Ms. Faulk nor Ms. Agerton recommended GEO for any of the regions. Ms. Faulk felt GEO's cost was significantly higher than the other vendors. She also had concerns about some of GEO's responses during the negotiation sessions, particularly with regard to the problems at Everglades. Ms. Faulk felt GEO lacked innovation, it did not understand the problems at Everglades, and it lacked an effective strategy for how not to have the problems reoccur in the future. Ms. Agerton did not recommend GEO for any of the regions because she felt they were very expensive compared to the other vendors; so expensive, in fact, that their price exceeded the Department's budget. Ms. Agerton also had concerns about GEO's current contract performance at Everglades. A formal recommendation memorandum was prepared by the procurement officer and routed through various levels of the Department. The memorandum included a cost analysis, which reflected the total awarded price for all four regions for the initial five-year term to be $57,683,377.25. GEO's proposed price for all four regions for the same period was $80,558,693.75, approximately $22,000,000 higher than the Department's intended awards for all four regions. Notably, the formal recommendation memorandum mistakenly reflected 225 prevention slots in Region 3, instead of the 320 prevention slots included in Gateway's alternative proposal; and 200 prevention slots in Region 4, instead of the 320 prevention slots included in Gateway's alternative proposal. For Region 3, multiplying 320 slots times Gateway's per diem rate of $3.89 (and by 365 days a year), results in an annual total cost of $454,352; compared to the annual cost figure of $319,466.25 for 225 slots reflected in the memorandum. For Region 4, multiplying 320 slots times Gateway's per diem rate of $3.89 (and by 365 days a year), results in an annual total cost of $454,352; compared to the annual cost figure of $283,970 based on 200 slots. Thus, accounting for the increased prevention slots for Regions 3 and 4 results in an annual increase in cost of $305,267.75 above the $11,536,675.45, for a total annual cost for all four regions of $11,841.943.20, and a five-year cost of $59,209,716. On the other hand, GEO's proposed price for all four regions for the same period was $80,558,693.75, which divided by five results in an annual cost to the Department of $16,111,738.70. GEO eliminated the cost of Aftercare services because the Department intends to use an Alumni Program for zero cost in lieu of Aftercare services. GEO calculated that removing the cost to the Department of Aftercare services would result in $1,885.790.75 less, or a total annual cost of $14,225,948.70. Thus, removing the cost of Aftercare services from GEO's proposed price for all four regions would still result in a five-year cost to the Department of $71,129,743.50, which may exceed the amount appropriated, budgeted, and available to the Department for substance abuse treatment for Fiscal Year 2017- 2018, and which far exceeds the cost of $59,209,716 (the amount of the proposed award to Gateway and UPI for the same time period).4/ The recommendation memorandum was approved by the Department's secretary on January 9, 2018. GEO's Protest GEO's protest raises numerous issues, none of which warrant rescission of the Department's intended award to Gateway and UPI. Gateway's Reply to the ITN GEO contends Gateway submitted only a single "statewide" reply to the ITN, and no reply for any regions, and therefore, Gateway is ineligible for a regional award. The persuasive and credible evidence adduced at hearing demonstrates that Gateway's reply was properly considered as a reply for multiple regions because Gateway clearly indicated its intent to be considered for multiple regions. Moreover, Gateway gained no competitive advantage over other vendors as a result of combining its statewide reply with a regional reply. In fact, the Department would have been inundated with replies if it required a vendor to reply for every conceivable combination of regions. UPI's Performance Guarantee GEO contends the Department materially deviated from the ITN and gave UPI a competitive advantage over it by allowing UPI to provide, in lieu of a performance bond, a cashier's check in the amount of $500,000 if awarded one region; $750,000 if awarded two regions; or $1,000,000 if awarded three regions. The persuasive and credible evidence adduced at hearing demonstrates that the Department did not materially deviate from the ITN and give UPI a competitive advantage over GEO by allowing UPI to provide, in lieu of a performance bond, a cashier's check in the amount of $500,000 if awarded one region; $750,000 if awarded two regions; or $1,000,000 if awarded three regions. Notably, the ITN did not require proposers to submit a performance bond or letter of credit with its reply to the ITN, and none of the vendors submitted a performance bond or letter of credit with their replies. Instead, in replying to the ITN, a vendor was only required to "demonstrate its ability to meet the Performance Bond requirements." UPI satisfied the requirements of the ITN by demonstrating its ability to meet the performance bond requirements. In any event, the reduction in the amount of the bond agreed to by the Department ($750,000 in connection with the award of contracts for two regions) did not provide UPI with a competitive advantage over GEO. At hearing, Mr. Thurston estimated GEO's annual cost of providing a performance bond in connection with contracts to be awarded pursuant to the ITN would be approximately $67,500, well below the $200,000 per year that UPI was quoted for its bond. Moreover, the amount of $67,500 is insignificant compared to the significant disparity in the annual, total prices proposed by GEO and UPI in their BAFOs for Regions 1 and 2 (GEO: $9,299,141.50; UPI: $6,342,203, for a difference of $2,956,938.50 per year). At hearing, Mr. Thurston acknowledged he could have raised the issue of the performance bond during negotiations. As Mr. Thurston also acknowledged at hearing, even if GEO had been able to negotiate an elimination of the performance bond amount requirement in its entirety, GEO would not have been able to offer a price that would have remedied the disparity. Gateway's BAFO (Prevention Services Ratio) GEO contends Gateway's ratio for Prevention Services counselors of 1:80, as provided in Gateway's BAFO alternative price offering, is a material deviation from the RBAFO requirements. As detailed above, this alternative offering was expressly permitted by the RBAFO and was further clarified by the Department to Gateway before its BAFO was submitted. Moreover, increasing the prevention capacity to 80 per institution adds an additional 605 inmates served at any one time, resulting in the Department being able to serve more inmates for the same appropriation amount. This is precisely the type of innovative thinking the Department sought to reach its goals. GEO did not submit an alternative pricing model, and it never asked the Department if the ratios for Prevention Counselors were negotiable. At hearing, GEO could not say how much it could have lowered staff levels, if at all, if it attempted to negotiate ratios. Gateway was not given a substantial advantage over GEO by increasing the prevention capacity. In addition, although chapter 65D-30 does include required ratios for certain types of services, there is no maximum caseload requirement applicable to Prevention Services. Gateway's BAFO (Part-Time Positions) GEO also contends Gateway violated GPR-037 in the RBAFO because Gateway's staffing models included part-time positions. However, the Department interprets the phrase "unless otherwise specified" to mean that unless the vendor specifies a position in its reply as part time, the Department will assume that any positions referenced in the reply are full time (40 hours). GEO never asked the Department for clarification on the meaning of the phrase "unless otherwise specified." At hearing, Mr. Thurston could not say whether its BAFO would have been adjusted had GEO asked about negotiating the positions, in terms of being full time. In any event, the Department currently utilizes part- time staff under the contracts being replaced by the ITN. Part- time staff may provide a more cost-effective solution than full- time staff. Gateway's BAFO (Clerical Positions) GEO also contends Gateway's alternate price offering provided for a reduction in clerical staff positions contrary to GPR-035 as set forth in Addendum 6 and the RBAFO. GPR-035 required that each vendor provide a minimum of one clerical position for up to 136 treatment slots, and one-half position for each additional 68 treatment slots. In support of its position, GEO presented Exhibit 1. However, GEO's Exhibit 1 is based on incorrect assumptions, and it is unreliable and unpersuasive. First, the ratios calculated by GEO are impermissibly "rounded-up." Secondly, contrary to GEO's position, the Department only calculates an additional one-half position once the full 68 treatment slots have been achieved. GPR-035 does not require one-half positions for "up to each additional 68 slots." A plain reading of GPR-035, consistent with the Department's reasonable interpretation, is that an additional one-half position is required only after the full 68 slots have been achieved. Gateway's base price offering fully complied with the staffing ratios when the ratios are calculated according to a plain reading of GPR-035, which is bolstered by the Department's practice in calculating ratios. Gateway's alternative price offering providing for a reduction in clerical positions to one full-time employee per facility was a cost-saving measure discussed with the Department and a product of negotiations. Even if Gateway's alternative price offering deviated with regard to the clerical positions, given the discrepancy between GEO's and Gateway's price offerings, the deviation is so small that it is a minor irregularity and not a material deviation. Gateway's BAFO (Pricing) GEO also contends Gateway failed to provide region- specific pricing or a final, firm pricing offer of any kind for the initial term or the renewal term. During negotiations and in its BAFO, Gateway reiterated that it would accept a regional or multi-regional award. Under Section 4.12 of the ITN, the Department reserved the right to seek clarification from vendors regarding their BAFOs and to reopen negotiations after receiving BAFOs. The negotiation team recommended awarding Gateway's alternate price offering for Regions 3 and 4 contingent upon clarification from Gateway that its pricing would be applicable to Regions 3 and 4. Although vendors were invited and could have attended the public meeting and heard this for themselves, none of them chose to attend. Four days later, on November 21, 2017, the Department's procurement officer reached out to Gateway's representative asking it to confirm that the pricing listed in the alternate price offering would remain the same if awarded individual regions as opposed to the entire state. Gateway's representative responded that the alternate prices included in Gateway's BAFO could remain in effect with a modified administrative personnel staffing plan if Gateway was awarded more than one region. At the time of this exchange, the Department's negotiation team had already recommended Gateway for Regions 3 and 4; so, the Department knew there would be no need to renegotiate pricing because Gateway was recommended to receive more than Region 4. According to Ms. Faulk, the Department understood Gateway's response to mean that the per diem pricing provided in Gateway's BAFO would apply to Regions 3 and 4. Gateway would reduce the oversight positions to two or three positions, consistent with the smaller level of responsibilities required for two regions instead of four. This exchange occurred prior to the drafting of the award recommendation memorandum, which was dated November 28, 2017. It was not signed by Ms. Faulk until January 3, 2018, or the Secretary until January 9, 2018. Gateway's per diem statewide pricing applied equally to Regions 3 and 4. Although Gateway did not provide a grand total price on its BAFO price sheet, the Department calculated the grand total price using the correct per diem unit prices provided. The ITN stated that unit prices would control in the event of a mathematical error. As it pertains to the price sheet instructions, the RBAFO stated that the vendor's pricing should represent the best price the vendor is willing to offer the Department. Gateway provided both a base price offering and an alternate price offering. The base price offering's price sheet contained the required per diem prices for both the original contract term and the renewal contract term. Under the section titled "TOTAL PRICE," Gateway appeared to sum the individual per diem prices rather than provide an actual grand total contract amount. Gateway did the same for its alternate price offering price sheet. Although Gateway did not provide a grand total price on the price sheet, it included a detailed budget breakdown for both its base price offering and alternate price offering. The Department felt these breakdowns offered additional transparency into Gateway's pricing. Section 4.10, Tab F, of the ITN provided that all calculations would be verified for accuracy by the Department's Bureau of Support Services staff, and that unit prices submitted by a vendor would prevail in the event a mathematical error is identified. Ms. Faulk testified the Department could calculate a grand total price by using the per diem pricing provided on the price page. She explained the Department could multiply the per diem price for each service type by the number of slots for that service, and then multiply that number by 365 days to arrive at the yearly price for a particular service. The Department could then add those prices together to obtain an annual total. She also explained these same calculations could be done for the renewal pricing. UPI's BAFO (Clerical Positions) GEO contends UPI deviated from the staffing requirements by providing fewer clerical support positions than required by the RBAFO. Specifically, GEO contends UPI had a deficit of six clerical support positions, and that if GEO knew it could reduce the staffing complement by six, it would have been worth approximately $270,000. UPI's clerical staffing ratios deviated from GPR-035, because its ratios were calculated based on the belief that prevention slots were not "treatment" slots. The ITN and RBAFO refer to prevention slots as treatment slots. Nevertheless, given the discrepancy between the prices submitted by GEO and UPI, UPI's deviations from the clerical staffing requirements are so small that they are minor irregularities and not material deviations. UPI's BAFO (Pricing) GEO also contends UPI's BAFO failed to include the Revised Price Sheet. Specifically, in paragraph 24 of its amended petition, GEO alleged: "UPI appears to have created its own form that emulated the format of the required form but provides many more spaces for additional information. Other Vendors that used the ITN required form did not have the opportunity to include this additional information." Although UPI did not use the specific Revised Price Sheet form, it provided per diem prices for each level of treatment as required by the form and additional information for the Department's consideration. GEO failed to include per diem pricing for Residential Therapeutic slots in Regions 2 and 4. GEO also modified its price sheets and submitted additional information in the form of annotations denoted by asterisk. In sum, the persuasive and credible evidence adduced at hearing demonstrates that the Department appropriately determined that the proposed awards to Gateway and UPI will provide the best value to the Department based on the selection criteria. Any irregularities in Gateway's and UPI's replies and BAFOs as alleged by GEO were minor and not material deviations. The Department's intended awards to Gateway and UPI are not contrary to the Department's statutes, rules, the ITN specifications, clearly erroneous, contrary to competition, arbitrary, or capricious.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Corrections enter a final order dismissing the protest of GEO Reentry Services, LLC. DONE AND ENTERED this 20th day of April, 2018, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 2018.
Findings Of Fact Developers Diversified Services Limited, an Ohio limited partnership (DDS) , entered into negotiations with petitioners with a view toward acquiring certain property owned by petitioners in Pasco County (the Santos tract) for use as part of a shopping center site. It was understood on all sides that the Santos tract would he unsuitable for this purpose without another, contiguous parcel which was owned by a bank. As a result of these negotiations, on April 23, 1974, petitioner Bay Crest Plaza, Inc. executed a deed to the Santos tract in favor of DDS. Respondent's exhibit No. 2. Attached to this deed are stamps reflecting payment of documentary stamp tax in the amount of seventy-five dollars ($75.00) and of documentary surtax in the amount of two hundred seventeen and one half dollars ($217.50). The remaining named petitioners executed a second deed to the same Santos tract in favor of DDS, on April 23, 1974. Respondent's exhibit No. 1. Attached to this deed are stamps reflecting payment of documentary stamp tax in the amount of six hundred seventy-five dollars ($675.00) and of documentary surtax in the amount of two hundred forty-seven and one half dollars ($247.50). Both conveyances (of the same property) were subject to an outstanding mortgage in favor of Mr. and Mrs. James L. Stevens in the original amount of one hundred thirty-one thousand two hundred fifty dollars ($131,250.00). On April 25, 1974, DDS executed a purchase money mortgage to secure payment of a promissory note in the amount of two hundred six thousand three hundred two and sixty-nine hundredths dollars ($206,302.69) , in favor of petitioners. The mortgage provided that "there is and will be no personal liability of the mortgagor. Respondent's exhibit No. 3. The deeds executed by petitioners in favor of DDS anci DDS' mortgage in favor of petitioners were all recorded in Pasco County on August 12, 1974, in the office of the clerk of the circuit court. There is no issue in the present case with respect to taxes due on account of the recording of any of these instruments. When it became clear that the bank was unwilling to sell the parcel DDS sought to buy from it, DDS reconveyed the Santos tract to petitioners by deed dated November 11, 1974. The deed from DDS to petitioners was filed in Pasco County in the office of the clerk of the circuit court on December 27, 1974. Attached to this deed are stamps reflecting payment of documentary stamp tax in the amount of thirty cents ($0.30) and of documentary surtax in the amount of fifty-five cents ($0.55). Thereafter, petitioners executed a satisfaction of the purchase money mortgage DDS had executed in favor of petitioners on April 25, 1974, and the satisfaction was filed in Pasco County in the office of the clerk of the circuit court on January 24, 1975.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent's revised notice of proposed assessment be upheld. DONE and ENTERED this 28th day of April, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Frank and Aniana Santos Frank and Ruby Johnson 36 Sandpiper Road Tampa, Florida 33609 Patricia S. Turner, Esquire Assistant Attorney General The Capitol Tallahassee, Florida 32304
Findings Of Fact Respondent James R. Azevedo is now and was at all times relevant herein a licensed real estate salesman having been issued license number 0396545. Respondent Allen Q. Smith is now and was at all times relevant herein a licensed real estate broker having been issued license number 0193451. Respondent M.S.D.S., Inc. d/b/a Sherwood Commercial Brokers, Inc. is a corporation licensed as a broker having been issued license number 0220922. At all times relevant to this proceeding, Respondent Smith was the sole qualifying broker and officer of Respondent M.S.D.S., Inc. d/b/a Sherwood Commercial Brokers, Inc. The Administrative Complaint was filed as a result of a transaction whereby Mr. Larry Chase sought to sell his swimming pool maintenance business using the brokerage and sales services of Respondents. When a proposed sale fell through, Respondents returned a $2,000 earnest money deposit to the purchaser. The return of the $2,000, which is the subject of the Administrative Complaint, was entirely proper under the circumstances. Mr. Chase does not dispute either Respondents' return of the deposit or the manner in which the return was carried out. Apparently, grievances between Respondents and Chase developed as a result of a later sales transaction where Respondents were, in their view, wrongfully deprived of their commission. However, there was no evidence whatsoever of wrongdoing by Respondents related to the charges herein.
Recommendation Based on the foregoing, it is RECOMMENDED that Petitioner enter a Final Order dismissing the Administrative Complaint. DONE and ENTERED this 21st of August, 1984, in Tallahassee. Florida. R. T. CARPENTER 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 21st day of August, 1984. COPIES FURNISHED: Fred A. Langford, Esquire Department of Professional Regulation Division of Real Estate Post Office Box 1900 Orlando, Florida 32801 Robert W. Beaudry, Esquire LYONS and BEAUDRY, P.A. 1605 Main Street Suite 1111 Sarasota, Florida 33577 Mr. Allen Q. Smith 5036 Camus Street Sarasota, Florida 33582 Harold Huff Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32801 Fred M. Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301
