The Issue The issues presented are whether Respondent, Smallwood Design Group/Smallwood Landscape, Inc. (Smallwood or the company), owes Petitioner $12,817.17 for agricultural products and, if so, whether the surety is liable for any deficiency.
Findings Of Fact Petitioner is a Florida corporation licensed by the Department as a “dealer in agricultural products,” within the meaning of Subsection 604.15(2), Florida Statutes (2006) (agricultural dealer).1 The license number and business address of Petitioner are 68954 and 3930 14th Street North, Naples, Florida 34103. Smallwood is a Florida corporation licensed by the Department as an agricultural dealer pursuant to license number 68513. The sole shareholder and registered agent for Smallwood is Ms. JoAnn Smallwood. The business address for Smallwood is 2010 Orange Blossom Drive, Naples, Florida 34109. Hartford Fire Insurance Company (Hartford) is the surety for Smallwood pursuant to bond number 21BSBCI1473 issued in the amount of $100,000 (the bond). The term of the bond is December 9, 2005, through December 9, 2006. Petitioner conducts a garden center business that, in relevant part, sells agricultural products, defined in Subsection 604.15(1). Petitioner sells products at wholesale and retail to businesses and consumers in the Naples area. Smallwood purchased agricultural products from Petitioner from 1983 until sometime in 2006. The purchases were made in the ordinary course of Smallwood's architectural landscape construction and horticultural management business (landscape business). The terms of purchase required payment from Smallwood within 30 days. Any monthly balance that remained unpaid after 45 days was subject to interest at a monthly rate of 1.5 percent and an annual rate of 18 percent.2 With one exception, Smallwood paid Petitioner within 60 days of delivery. The exception to Smallwood's payment history with Petitioner is the subject of this proceeding. From May 11 through September 26, 2006, Smallwood did not pay Petitioner $12,817.17 for 66 invoices involving 440 items (pallets or pieces) of sod that Petitioner delivered to Smallwood.3 The sod consisted of varieties identified in the record as: Floratam, Seville, Zoysia, Croton, and Fountain Grass.4 Smallwood does not deny that Petitioner should be paid $12,817.17. However, Smallwood alleges that Petitioner has filed its claim against the wrong party. Smallwood alleges that, on June 13, 2006, another corporation purchased the assets of Smallwood, including the right to conduct the landscape business in the name of Smallwood, and assumed Smallwood's liability to Petitioner for any prior purchases. Subsequent purchases are allegedly the obligation of the successor corporation. Ms. Smallwood filed a Response to Amended Claim with the Department on January 7, 2007 (the Response). The Response identifies the successor corporation as Spartan Partners, Inc., an Illinois corporation, located at 350 Pfingsten Road, Suite 109, Northbrook, Illinois 60062 (Spartan), and alleges that Petitioner’s claim is not valid because: [Smallwood] sold its assets and has not been engaged in business since June 13, 2006. Specifically, pursuant to an Asset Purchase Agreement, [Smallwood] sold its assets (including its name) to Spartan . . . , and thereafter, Spartan continued operating the business for a period of time and then sold some of the assets and ceased operations. (emphasis supplied) Smallwood . . . does not have knowledge of the accounts of Spartan, which continued doing business under the Smallwood name after the sale of assets on June 13, 2006. If items purchased from [Petitioner] have not been paid for, Spartan is the responsible and liable party. (emphasis supplied) The Response filed in January of 2007 was not the first time Petitioner had seen the Smallwood defense. Smallwood sent Petitioner a form letter, dated September 14, 2006, that: contained a salutation addressing “All Vendors of [Smallwood],” referenced the "Termination of Credit Arrangements and Guaranties," and was signed by Ms. Smallwood on behalf of Smallwood (notice letter). The notice letter provided in relevant part: The purpose of this letter is to advise you that the assets of [Smallwood], including the company name, were sold to Spartan . . . as of June 13, 2006. Since [Smallwood] sold all of its assets, that corporate entity is no longer actively engaged in any business. The business known as [Smallwood] is now conducted by [Spartan]. (emphasis supplied) As a result of the sale of assets and the fact that [Smallwood] is no longer actively engaged in business, the relationship or agreement you had with that particular corporate entity is hereby terminated and of no further force and effect. If you are continuing to do business with [Spartan], you should, if you have not done so already, make or confirm your business arrangements with that entity. Furthermore, if I signed any document that could be construed as a personal guaranty of payment for any obligations of [Smallwood], please consider this letter to be a formal revocation, cancellation and termination of any such document. (emphasis supplied) Petitioner's Exhibit 3 (P-3). Part of the Smallwood defense is supported by the evidence. Smallwood did sell its assets to Spartan. The Asset Purchase Agreement between Smallwood and Spartan was admitted into evidence as Petitioner’s Exhibit 2 (P-2). The Agreement shows that Spartan purchased the assets of Smallwood on June 13, 2006, for $1.030 million, of which $883,602.11 was allocated to accounts receivable due the seller. The seller is identified in the Asset Purchase Agreement as Ms. Smallwood and the company. The seller received $895,500.00 in cash at the closing. The remaining part of the Smallwood defense involves two allegations. First, Smallwood alleges that Spartan assumed a liability of $3,834.43 for 23 purchases of sod by Smallwood from May 11 through June 13, 2006. Second, Smallwood alleges that Spartan owes Petitioner $8,982.74 for 43 purchases of sod from June 14 through September 26, 2006. If the evidence were to support both allegations, the result may effectively deprive Petitioner of an administrative remedy. The corporate documents attached to the Asset Purchase Agreement do not show that Spartan complied with the bond and license requirements in Subsection 604.19 prior to conducting the landscape business in the name of Smallwood. Spartan sold the assets needed to satisfy a judgment against Spartan, Spartan is a foreign corporation, and Spartan no longer conducts the landscape business in Florida. It would be unnecessary to determine whether Smallwood or Spartan is liable for the $12,817.17 if: the terms of the bond were to allow an assignment of the bond to Spartan, and the Asset Purchase Agreement were to show that the bond was one of the contracts assigned to Spartan or one of the assets purchased by Spartan. The bond would cover both Smallwood and Spartan in such a case, and a determination of which shell hid the proverbial pea would be moot. A copy of the bond did not find its way into the record. Petitioner did not submit a copy of the bond for admission into evidence, and the Department did not transmit a copy of the bond when the agency referred the matter to DOAH. The copy of the Asset Purchase Agreement admitted into evidence does not include a schedule of the contracts assigned to Spartan or a schedule of the assets sold to Spartan. A finding that Spartan expressly assumed Smallwood's liability to pay Petitioner $3,834.43 for sod delivered from May 11 through June 13, 2006, is not supported by the evidence. In relevant part, the Asset Purchase Agreement provides: At Closing, Purchaser shall assume those liabilities of Company specifically defined and listed on the Schedule 1.6(b) attached hereto (“Assumed Liabilities”), and Purchaser shall not assume, incur, guarantee, or be otherwise obligated with respect to any liability whatsoever of Company other than as so stated. . . . (emphasis not supplied) Purchaser shall cause Stockholder [Ms. Smallwood] to be released as guarantor or obligor under the Assumed Liabilities. . . . P-2 at 2. Schedule 1.6(b) is missing from the copy of the Asset Purchase Agreement that was admitted into evidence. Even if a complete exhibit were to show that Spartan assumed Smallwood's liability to Petitioner, neither of the respondents submitted evidence or cited legal authority to support a finding that such an assumption released Smallwood from its obligation to Petitioner or otherwise extinguished that obligation. Nor is there any evidence that Petitioner acquiesced in an assumption by Spartan or otherwise released Smallwood from the obligation to pay Petitioner for sod delivered prior to June 13, 2006. The remaining allegation in the Smallwood defense is that Spartan, rather than Smallwood, purchased the sod Petitioner delivered between June 13 and September 26, 2006. It allegedly is Spartan that owes Petitioner $8,982.74. The remaining allegation implicitly argues that, after June 13, 2006, Smallwood was no longer a viable corporation with the legal capacity to purchase sod from Petitioner because the asset sale resulted in what courts describe as a “de facto merger” of Smallwood into Spartan or a “mere continuation of business” by Spartan. The law pertaining to these two doctrines is discussed in the Conclusions of Law, but certain factual findings are relevant to both doctrines. The Smallwood defense is a mutation of the doctrines of "de facto merger" and "mere continuation of business," either of which have been utilized by courts to hold a successor corporation liable for the obligations of the corporate predecessor. The Smallwood defense takes the relevant judicial doctrines a step further. The defense implicitly assumes that if a "de facto merger" or "mere continuation of business" occurred as a result of the asset sale, Smallwood "merged" into Spartan, and Smallwood was no longer a viable corporate entity with the legal capacity to purchase sod from Petitioner. Two facts preclude the application of either judicial doctrine to the sale of Smallwood's assets. First, there is no commonality or continuity of ownership interests between Smallwood and Spartan. Spartan did not acquire some or all of the stock of Smallwood, and Ms. Smallwood did not become a shareholder in Spartan. The two corporations do not share common directors or officers. The second fact involves the purchase price paid for the Smallwood assets. The purchase price does not suggest a cozy relationship between Smallwood and Spartan that otherwise may have persuaded a court to disregard the separate corporate existence of Smallwood after the asset-sale. No evidence suggests that the price paid was not the fair market value of the Smallwood assets negotiated at arms length between a willing buyer and a willing seller. Smallwood remained in existence as a viable Florida corporation after the asset-sale on June 13, 2006. No legal impediment prevented Smallwood from purchasing sod from Petitioner, and Smallwood had the legal capacity to do so. The purchases may have breached the terms of the Asset Purchase Agreement, but the legal capacity of Smallwood to purchase sod from Petitioner is not driven by contractual arrangements between Smallwood and private third parties. Smallwood remained in existence as a Florida corporation at least through January 7, 2007, when Ms. Smallwood filed the Response with the Department. The Response does not allege as a factual matter that Smallwood had been liquidated and was no longer in existence as a Florida corporation; or that the $895,500 the seller received for the sale of assets was not in corporate solution and available to pay invoices submitted by Petitioner. The Response merely states that Smallwood was not actively engaged in the conduct of business. Smallwood was actively engaged in the landscape business after June 13, 2006. Smallwood maintained its customary banking account; continued to issue checks imprinted with the company name; paid Petitioner for goods that Petitioner delivered to Smallwood before May 11, 2006; accepted without objection or disclaimer 43 invoices totaling $8,982.74 that were billed to the company for sod delivered to the company at the company's business address; issued the notice letter to its creditors; and purported to terminate credit agreements and guarantees. Prior to receiving the notice letter, Petitioner had no reason to believe that Smallwood was not conducting the landscape business. The face of Smallwood remained unchanged. Ms. Smallwood continued to operate the landscape business pursuant to a long-term employment contract with Spartan. Spartan signed Mr. Keith Whipple, another key employee of Smallwood, to a similar contract. Copies of the employment contracts are attached to the Asset Purchase Agreement.5 Between June 13 and September 14, 2006, Ms. Smallwood continued to sign Smallwood checks imprinted with the company name and issued on the Smallwood business account. Ms. Smallwood signed the checks as the authorized representative of Smallwood. Smallwood accepted 35 invoices issued to the company for $7,007.13 and deliveries of the sod at the company's customary business address. The notice letter was dated September 14, 2006, but Petitioner received the letter on or about September 26, 2006. Between September 14 and 26, 2006, Smallwood accepted eight invoices for sod purchased for $1,975.61. The evidence does not show when Smallwood actually mailed the notice letter, and Petitioner did not stamp the notice letter with the date it was received. The chief operating officer for Petitioner testified at the hearing but does not recall the date Petitioner actually received the notice letter. However, the witness testified that Petitioner stopped all sales to Smallwood immediately upon receipt of the notice letter to allow time for Petitioner to complete a credit check of Spartan. The trier of fact finds the relevant testimony to be credible and persuasive. The failure to timely disclose the identity of Spartan as a successor entity operating in the name of Smallwood misled Petitioner, if not other creditors.6 Between June 13 and September 26, 2006, Petitioner extended credit for purchases of $8,982.74 before Petitioner had the opportunity to ensure the credit worthiness of Spartan and, if desired, to obtain a written guarantee from the individual officers and shareholders.7 Smallwood, rather than Spartan, purchased sod from Petitioner from May 11 through September 26, 2006. Smallwood owes Petitioner $12,817.17. Hartford does not claim that the terms of the bond do not ensure payment of the purchases made by Smallwood. Hartford’s sole objection in its PRO is that the bond proceeds must be paid directly to the Department rather than to Petitioner. Hartford correctly cites Subsection 604.21(8) in support of its objection.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order directing Smallwood to pay $12,817.17 to Petitioner, and, in accordance with Subsection 604.21(8), requiring Hartford to pay over to the Department any amount not paid by Smallwood. DONE AND ENTERED this 15th day of August, 2007, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of August, 2007.
Findings Of Fact Based upon all of the evidence, including the stipulation of the parties, the following findings of fact are determined: Petitioner, Charles W. Ward, Jr., is a co-owner, with other members of his family, of a cattle ranch in south Hendry County known as Ward Farms. Respondent, Maddox Brothers Produce, Inc., is a licensed agriculture dealer engaged in the business of brokering agriculture products in the State of Florida. As an agriculture dealer, respondent is subject to the regulatory jurisdiction of the Department of Agriculture and Consumer Services (Department). One such requirement of the Department is that all dealers post a surety bond with the Department's Division of Licensing and Bond. To this end, respondent has posted a $50,000 surety bond with Fireman's Fund Insurance Company as the surety. In addition to raising livestock, petitioner also grows watermelons on his property. Pursuant to an agreement by the parties, between April 16 and May 15, 1990, respondent harvested and then transported petitioner's watermelons to other destinations outside the state. The parties have stipulated that respondent still owes petitioner $53,980.92 as payment for the watermelons. Respondent has agreed to pay petitioner the above sum of money on or before February 15, 1991, or within fifteen days after the agency's order becomes final, whichever is later. Otherwise, payment shall be made from respondent's bond posted by the surety, Fireman's Fund Insurance Company.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered finding that respondent, a licensed agriculture dealer, is indebted to petitioner in the amount of $53,980.92, and that such debt be satisfied in accordance with the time limitations set forth in this recommended order. Otherwise, Fireman's Fund Insurance Company shall be obligated to pay over to the Department the full amount of the bond, or $50,000. DONE and ENTERED this 24th day of January, 1991, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 24th day of January, 1991. COPIES FURNISHED: Charles W. Ward, Jr. Star Route, Box 72 LaBelle, Florida 33440 Patricia Maddox Harper 4253 Kingston Pike Knoxville, Tennessee 37919 Barbara J. Kennedy, Esquire Fireman's Fund Insurance Company Post Office Box 193136 San Francisco, California 94119-3136 Bob Crawford Commissioner of Agriculture The Capitol Tallahassee, Florida 32399-0810 Richard D. Tritschler, Esquire General Counsel Department of Agriculture 515 Mayo Building Tallahassee, Florida 32399-0800 Brenda D. Hyatt, Chief Bureau of Licensing & Bond 508 Mayo Building Tallahassee, Florida 32399-0800
The Issue Is Petitioner entitled to compensation for the sale of agricultural products, and, if so, how much?
Findings Of Fact On or about August 28, 2001, Petitioner sold F.O.B. (Free on Board) at Petitioner's farm to P.S.L. Landscape Services Inc. (hereafter, PSL), 16 Crepe Myrtle trees 14 feet tall and 5 Live Oak trees 2.5 -3.0 inches in Diameter Breast High for a total costs, including tax, of $4,208.20. These trees were dug and wrapped in accordance with the standards of the American Association of Nurseryman in the afternoon of August 30, 2001. The tree roots balls were 40 inches in diameter, and the root balls were placed in wire baskets lined with burlap. The trees were placed upon a flatbed truck with the tops of the trees resting on a rack, and the entirety of the trees, except the roots, covered with a plastic screening material used for this purpose to keep the leaves from becoming wind burned in transit. The trees were transported overnight to PSL where they were received Broward County the following morning at 8:00 a.m. The trees were received and signed for by a representative of PSL, Randy Smith. The documents accompanying the shipment were introduced as part of Petitioner's Composite Exhibit 1. The first of these documents signed by Smith states: Attention: We do not replace trees. If trees are not in satisfactory condition when received, do not accept them. So please take care of your trees. Refer to watering guide in our catalog. The second document signed by Smith provides in bold type at the bottom of the page: DO NOT REFUSE TO UNLOAD THE TRUCK. If there is a serious problem and you question the merchandise, call our office immediately. Our number is 352 493 2496. PSL provided the freight company two checks, one to the freight handler for the freight and the other for 4,208.20 to Petitioner. This check was delivered to the Petitioner by the freight company and deposited by the Petitioner in due course. The Petitioner was notified several days later that a stop payment order had been received on the check for $4,208.20 by PSL. This was the first time the Petitioner was aware of a problem with the merchandise. PSL had not contacted the Petitioner about any problem with the shipment. When Mr. George Kijewski of PSL was contacted regarding the stop payment order, he responded that the trees had wilted. He wrote a letter dated December 21, 2001, to the Department of Agriculture in which he stated: Our firm ordered material from A.D. Andrews Nursery for one of our projects. Two Live Oaks were not number one as ordered. The Crepe Myrtle came in bone dry, not wet as the nursery states. The nursery dug up the plant material ordered and left items in the field until they were loaded onto truck for delivery. They never went to holding area prior to loading to get watered or hardened off. When we got them they were wilting . . . [.] Mr. Deming was present when the trees were prepared. Mr. Kijewski was not present when the trees were prepared. Mr. Deming described the manner in which the trees were dug, prepared for shipment, and shipped. The Crepe Myrtles were dug using a tree spade; the root balls were placed in burlap- lined wire baskets; and the trees placed on the trailer bed where they were secured and covered with a plastic screen to protect them from wind in transit. The Oaks were handled in a similar manner. The trees were not watered; however, the area had received approximately 1.5 inches of water in the seven days prior to shipment. The roots were wet enough to cause the burlap to be damp. The shipping documents do not reflect any wilting or problems although the documents, as quoted above, advised that product should not be received if not in good shape. No notes were made upon receipt reflecting the alleged poor condition of the trees. The trees were sold F.O.B. at Chiefland, and were the property of PSL when loaded.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department enter a final order adopting these findings and conclusions of law, directing PSL to pay to Petitioner $4,208.20 within 14 days of receipt of its final order; and, if PSL fails to abide by the Department's order, directing the surety to make good on its bond in the amount of $4,208.20. DONE AND ENTERED this 30th day of April, 2002, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 2002. COPIES FURNISHED: Andy D. Andrews A. D. Andrews Nursery Post Office Box 1126 Chiefland, Florida 32644 Brenda D. Hyatt, Bureau Chief Department of Agriculture 541 East Tennessee Street Tallahassee, Florida 32308 George Kijewski P.S.L. Landscaping Services, Inc. Post Office Box 9421 Port St. Lucie, Florida 34985 Deborah A. Meek Cumberland Casualty & Surety Company 4311 West Waters Avenue Suite 401 Tampa, Florida 33614
Findings Of Fact Sale and delivery of trees: dates, quantities, invoices and charges On November 14, 1985, J. Floyd Knecht, President of Tomasella and Company of Florida, Inc. (Tomasella) signed a credit application with Holmes Gardens Associates, Ltd. (Holmes). P. Ex. 1 and 2. Tomasella is in the business of landscaping. This credit application was in conjunction with the intended purchase of live oaks by Tomasella from Holmes for landscaping the Florida Mall in Orlando, Florida. The live oaks were to be delivered by Holmes to Tomasella at the site in Orlando. The agreement between the parties was that payment for shipments invoiced on or before the 29th of the month were due on the 10th of the following month, and that overdue accounts were subject to a monthly service charge of 1.5 percent. In December, 1986, Holmes delivered 132 live oak trees at $140 each and one phoenix roebelini at $150, the agreed prices. The 132 live oaks came from Holmes's nursery in Ft. Lauderdale, Florida. For these deliveries, Tomasella initially owed $19,156.00. However, Tomasella was given a credit by Holmes for 24 live oaks that were delivered in a defective condition, and which subsequently died. The net figure then owing was $15,796.00, which Tomasella paid by check dated February 4, 1986. R. Exs. 1 and 2; P. Ex. 8. Holmes does not claim that any additional money is owed by Tomasella relating to these sales and deliveries. On or about November 21, 1985, Holmes delivered two phoenix roebelini trees to Tomasella. In connection with this sale, Tomasella received an invoice for $315.75, and the invoice was received by an authorized agent of Tomasella. The face of the invoice stated in capital letters that Holmes was "not responsible for plant materials once they have left the premises." Tomasella has not paid this invoice or returned the trees. P. Exs. 1 and 2. The amount of $315.75 therefore is due and owing, and is not the subject of any defense in this case. The next delivery concerned live oaks that were obtained from south Georgia. A total of 82 live oaks were next delivered on or about January 23, 1986, and these deliveries are reflected in two invoices which are exhibits C and D to P. Ex. 1. P. Exs. 1 and 2. Both invoices were signed by an authorized agent of Tomasella, and none of the trees delivered as reflected on these invoices were ever returned by Tomasella. Holmes billed Tomasella $110 per tree, the agreed price, and $400 per delivery, for a total of $10,271.00. P. Ex. 1, exhibits C through F. By check dated April 18, 1986, Tomasella paid these invoices, with the exception of $300 per delivery, for a shortage of $600. Exhibit G to P. Ex. 1. Tomasella was correct that the delivery charge should have been only $100, and thus Tomasella has completely paid for these 82 live oak trees. The next delivery of live oaks has not been paid by Tomasella. On or about March 6, 1986, Holmes delivered to Tomasella 20 live oaks. Three of these were defective, and were rejected on delivery. Thus, 17 live oaks were ultimately delivered and billed, and none of these trees were ever returned by Tomasella. In conjunction with this sale, Holmes delivered to an authorized agent of Tomasella an invoice entitled "quotation staging order." This document had printed in large capital letters that Holmes was "not responsible for plant materials once they have left the premises." The document was for $2,363.50, again with each tree at $110 and a delivery charge of $400. P. Ex. 1, ex. H, P. Ex. 2. On or shortly after March 7, 1986, Holmes sent Tomasella a typed invoice requesting payment for this delivery in this amount. Ex. I, P. Ex. 1. The correct amount, subtracting the erroneous amount of the delivery charge of $300, is $2,063.50. Tomasella has not made any payment on this delivery and these invoices. On March 10, 1986, Holmes sold and delivered 18 live oaks to Tomasella and on March 14, 1986, Holmes sold and delivered 13 live oaks to Tomasella. Like other deliveries, Holmes prepared a quotation-shipping order document in connection with these deliveries, and that document was signed by an authorized agent of Tomasella. On or about March 28, 1986, Holmes sent two invoices to Tomasella requesting payment for these deliveries ($2,479.00 for the 18 live oaks and $1,901.50 for the 13 live oaks). Both invoices reflect a $400 delivery charge. Tomasella has not returned any of these 31 trees and has not paid any amounts on these invoices. Subtracting $300 incorrectly billed as delivery charges on both invoices, the correct amount due and owing is $3,780.50. P. Exs. 1 and 2, exs. J, K, and L to P. Ex. 1. On or about April 1, 1986, Holmes delivered 8 live oaks to Tomasella, and an authorized agent of Tomasella signed an invoice prepared in connection with this delivery. The document contained in capital letters the statement that Holmes was "not responsible for plant materials once they have left the premises," and reflected a charge of $1,276.00, which included $100 for the delivery. Tomasella has neither paid this charge nor returned any of these trees. On or about April 18, 1986, Holmes delivered one phoenix roebelini to Tomasella. An authorized agent for Tomasella signed an invoice prepared in connection with this delivery. On the face of the invoice was printed in capital letters the statement that Holmes was "not responsible for plant materials once they have left the premises." The price of the tree was $183.75. Tomasella has not paid this amount, and has not returned the tree. P. Ex. 1, ex. N and P. Ex 2. The amount in dispute Thus, the total amount billed to Tomasella by Holmes and not yet paid is $8,519.50. The parties, however, stipulated during the hearing that the amount claimed by Holmes is $8,203.75 plus interest. Tomasella admits that it owes Holmes $2,943.58. The issue of the correct delivery charge Tomasella contends, however, that it should pay $100 per delivery, not $400, on invoices 3871, 3869, 4139, 4354, and 4355, which is a total of $1,500 at $300 per invoice. The agreed delivery charge for all deliveries was $100 per delivery. Thus, the correct delivery charge on invoices 3871,3869, 4139, 4354, and 4355 is $100, and the amount owing to Holmes should be adjusted accordingly. Correcting for the delivery charge of $400 (which should have been $100) on 3 deliveries on March 6, 10, and 14, 1986, the correct total billed by Holmes to Tomasella is $7,619.50. This has not been paid to Holmes. (The other $600 for two deliveries of 82 trees on January 23, 1986, was accounted for in finding of fact 5 since Tomasella paid all of this bill except this $600 amount.) The issue of guarantee or credit for 39 dead trees Tomasella contends that 39 live oaks died after planting. These live oaks were part of a second group of trees negotiated for purchase in late December, 1985, at a price of $110 per tree. (The first group of 132 trees from the Ft. Lauderdale nursery were all delivered by the end of December, 1985.) It further contends that Holmes agreed to guarantee that all live oaks would live after planting. This guarantee, Tomasella contends, was extended by Holmes's salesperson Ricardo Leal. Tomasella argues that it should not have to pay $110 for each of these live oaks, which is $4,290 in dispute. Whether Mr. Leal extended a guarantee and the nature of the guarantee Ricardo Leal was employed as a salesperson by Holmes in the fall of 1985 in Tampa, Florida, and was so employed in Tampa until about January 8, 1986, when he terminated his employment with Holmes. Mr. Leal worked on a salary plus commission basis, and was paid when Holmes was paid for the sale. James R. Murrian, Vice President of Tomasella, was the project manager for the Florida Mall project in late 1985 and 1986. At the beginning of the negotiations that led to the sale and delivery of trees to Tomasella, Mr. Murrian visited the nursery of Holmes in Ft. Lauderdale to inspect the trees available at that nursery, and agreed to accept 132 live oak from that nursery. Mr. Murrian dealt only with Mr. Leal in the initial negotiations concerning the sale. Mr. Murrian initiated the discussion of a guarantee. Mr. Leal told Mr. Murrian that "he would guarantee the trees 100 percent." In December, 1986, when Tomasella negotiated for the shipment of additional tree, Mr. Leal told Mr. Murrian that the same guarantee would apply. Mr. Murrian did not clearly testify as to the details of Mr. Leal's guarantee. He first simply called it a guarantee. On cross examination, when asked if the period of the guarantee had been discussed, he said that it would probably have been 90 days. The procedure for implementing the guarantee was not discussed and the guarantee was not in writing. Later in cross examination, he seem to realize that the nature of the guarantee had been left vague, and testified that Mr. Leal had told him that "if any trees die, we will replace them within 90 days." However, Mr. Murrian also admitted that after he learned that 39 trees had died, he made no effort to tell Holmes, despite his claim that the guarantee was only for a 90 day period. Thus, this latter portion of testimony is not believed. It was not presented on direct examination, and appeared at the time to have been formed to fill a gap in evidence revealed by cross examination. The only other evidence of the nature of the guarantee is contained in the letter of November 14, 1986, from Mr. Knecht to Mr. Arroyo. P. Ex. 5. In this letter, Mr. Knecht asserted that "Rick Leal guaranteed all trees 100 percent, the only condition being that he be allowed to visit the site to assure himself that the trees were properly handled. This he did. Mr. Knecht was not present when Mr. Leal communicated the "guarantee" to Mr. Murrian. Thus, this account of the guarantee could only be based on what Mr. Murrian told Mr. Knecht. Yet Mr. Knecht did not testify that Mr. Leal told him that the "only condition" was that he be allowed to visit the site to inspect. The letter, however, contains no information concerning any limitations upon the "guarantee" (such as damage by weather or mishandling by Tomasella) or how long the guarantee would be in effect. In this sense, the letter of Mr. Knecht tends to substantiate the testimony of Mr. Murrian that the terms of the "guarantee" extended by Mr. Leal were not in fact communicated to Holmes, and were not clearly understood by Holmes. The authority of Mr. Leal to extend a guarantee Mr. Leal had previously been instructed by his supervisor, David Knight, that Holmes did not extend a guarantee with respect to plants it sold. Mr. Leal was also told that he did not have authority to extend a guarantee. These instructions occurred when Mr. Leal was hired by Holmes. He was again given these instructions by Mr. Knight at a company meeting near Christmas in 1985, which probably was after Mr. Leal had stated to Mr. Murrian that the trees were "guaranteed." The instructions given to Mr. Leal were the same as were routinely given to all Holmes salespersons from time to time by memorandum, in meetings, in informal discussions, and when problems came up with trees that had been delivered. No one from Holmes told any agent of Tomasella that Mr. Leal had authority to extend a guarantee. The policy of Tomasella with respect to guarantees For at least the past two and one-half years, the time that Antonio Arroyo, the Comptroller for Holmes, has been employed by Holmes, Holmes has had the policy of not guaranteeing plant materials sold. This policy was credibly established by the testimony of Mr. Arroyo and Mr. Knight. The official price list of Holmes in effect from April 1, 1985 to September, 1986, had on the back a section entitled "TERMS AND CONDITIONS OF SALE." In capital letters, one of the terms and conditions of sale was that "seller gives no further warranty expressed or implied as to merchantability or fitness for any particular use of its stock." The official price list contains no guarantee or warranty that plant materials sold and delivered will live. P. Ex. 3. Holmes routinely hands out its price list at shows, mails it to customers, and otherwise publishes it to customers as its official price list. A substantial number of the invoices or quotation staging orders involved in the sale of trees to Tomasella, as discussed in findings of fact 4, 6, 8, and 9 above, contained in bold red print the following statement: "not responsible for plant materials once they have left the premises." The policy of Holmes policy to not give guarantees is consistent with industry practice. It is a common practice in the industry for nurseries to put a "non-guarantee" statement on price lists and invoices. Nurseries and other sellers of living plants customarily refuse to give a guarantee that the plants will live because plants are fragile, require proper care, and may die due to lack of care by the buyer, a matter beyond the control of the seller. Holmes did have a policy of extending credits for defective trees. Only the President of Holmes, Dr. Ricardo Pines, his son, Gustavo Pines, or the Comptroller, Mr. Arroyo, had authority to grant a credit. Credits were given not as a guarantee at the outset, but as an after-the-fact matter, on a case by case basis as a result of a complaint by the buyer at delivery that the trees had been damaged by Holmes prior to delivery, and after such defects had been verified by Holmes by inspection immediately after such a complaint. The reasonableness of the reliance of Tomasella upon the apparent authority of Mr. Leal to extend a guarantee According to Mr. J. Floyd Knecht, President of Tomasella, it was a standard practice of nurseries to state in their catalogues that plants are not guaranteed, but it also was a standard practice for Tomasella to negotiate for a guarantee. Tomasella had had business dealings with Holmes in the prior year, but Mr. Knecht did not remember any discussions then with Holmes concerning guarantees. Mr. Knecht probably had a copy of the price list issued by Holmes, the one that clearly disclaimed any warranty of merchantability or fitness for a particular purpose, P. Ex. 3. Mr. Knecht knew or should have known that the price list disclaimed any warranty of merchantability or fitness for a particular purpose because he knew that the price contained a term of sale that payment was due on the 10th of the month following the invoice date, if before or on the 29th, and that overdue accounts were charged 1.5 percent as a service charge. These terms were only 4 lines under the bold print that contained the disclaimer of warranties. Mr. Murrian was the project manager for Tomasella, was a Vice President, and had worked for Tomasella for five years. He thus had a considerable amount of experience in purchase of plants for the landscaping business. Mr. Murrian was the only employee of Tomasella who spoke to Mr. Leal about obtaining a guarantee, and there were no other witnesses to that conversation. No one from Tomasella was told by anyone from Holmes that Mr. Leal had authority to extend a guarantee. Mr. Murrian had never dealt with Mr. Leal before. Mr. Murrian did not try to find out if Mr. Leal had authority to extend a guarantee of any type. He did not confirm the oral guarantee by sending a written request for confirmation to Tomasella. Mr. Murrian did not discuss with Mr. Leal the time period of the guarantee or the procedures that would be followed to implement the guarantee, and he did not ask that the guarantee be put in writing. As discussed in a preceding finding of fact, Mr. Murrian did not in fact pin down the details of the guarantee extended by Mr. Leal. There is no evidence that Tomasella would not have bought trees from Holmes if Holmes had refused to extend a guarantee. As discussed in findings of fact 4, 6, 8, and 9 above, some of the invoices received by Tomasella over the period of delivery of trees had printed in capital red letters the words "not responsible for plant materials once they have left the premises." This occurred on the invoice received shortly after November 21, 1985, relating to two phoenix roebelini trees, that was received shortly after March 6, 1986, for 20 live oaks, that was received shortly after April 1, 1986, for 8 live oaks, and that was received shortly after April 18, 1986, relating to one phoenix roebelini. Thus, as early as late November, 1985, Tomasella was receiving disclaimers from Holmes that were directly contrary to the alleged guarantee extended by Mr. Leal. Yet no one from Tomasella contacted Holmes to see if Mr. Leal had had authority to extend a warranty, or to ask for an explanation of the statements on the invoices. At some time after delivery of the first group of 132 live oak trees in December, 1986, 24 of those trees died, and Tomasella immediately notified Holmes. Mr. Knight immediately inspected these trees, and determined that Holmes had been at fault because the trees had been shipped too early after digging. However, the President of Holmes, Dr. Ricardo Pines, initially did not want to grant a credit. When the decision to grant credits was finally made, Mr. Knight was instructed by Dr. Pines to make it clear to Tomasella that Holmes did not guarantee the trees. At the time Mr. Knight accepted Tomasella's check which deducted credits for the 24 trees (R. Ex. 1), which must have been on or shortly after the date of the check, February 4, 1986, he obeyed these instructions and told Tomasella's agent, Mr. Murrian, that the credit for 24 trees was a "break" given to Tomasella and that Holmes did not guarantee trees. Mr. Murrian testified that he personally observed the 39 dead trees, and that all died within 2 to 3 days of planting, or at most within a couple of weeks. There is no evidence in the record as to when these trees were received by Tomasella or planted by Tomasella. Mr. Murrian took no action to tell Holmes that these 39 trees were dead. Approximately 30 days after the date that the first invoice relating to the trees shipped from Georgia was due for payment, but had not been paid, (which would have been about 30 day from March 7, 1986 or from March 28, 1986), Mr. Knight started to try to collect from Tomasella by telephone calls. Although other reasons were given for delay in payment, Tomasella did not mention any problem of dead or dying trees or any guarantee. The trees would have been dead by this time, based on the only evidence in the record on this point, from Mr. Murrian. In late spring or early summer of 1986, Mr. Murrian told Mr. Knight that 39 trees were dead. In June or July of 1986, there was a meeting in Ft. Lauderdale between Mr. Knight and Mr. Knecht concerning purchase of trees for a Boca Raton project. Mr. Knecht mentioned the dead trees only after Mr. Knight asked when Tomasella was going to pay Holmes. There is no 14 evidence that Mr. Knecht mentioned a guarantee from Mr. Leal at this time. When Mr. Knight was told that 39 trees were dead, he did not tell his superiors in Holmes. He told agents for Tomasella that the trees were not guaranteed. Mr. Knight did not inquired of Dr. Pines or Gustavo Pines whether a credit could be extended for the 39 trees, and Mr. Knight did not extend credits for these trees. On July 29, 1986, Holmes wrote a letter to Tomasella demanding payment for $10,099.03. P. Ex. 4. Tomasella never responded in writing directly to that letter. It was not until November 4, 1986, that Tomasella stated in writing that it claimed that it should be given a credit for 39 dead trees. P. Ex, 1, request 62, P. Ex. 2, response 62. The letter did not, however, mention a guarantee by Mr. Leal, but claimed a promise of credit from Mr. Knight. Ten days later Tomasella wrote a letter to Holmes. This was the first written communication that mentioned a guarantee by Mr. Leal. The letter also acknowledged an awareness by Tomasella that Mr. Leal had terminated his employment with Holmes. P. Ex. 5. Did the 39 trees actually die? The only evidence that 39 live oak trees actually died is the testimony of Mr. Murrian and Mr. Knecht. Neither adequately explained why it took so long to notify Holmes. The delay could be evidence that the trees did not in fact die. It also could be evidence that Tomasella thought that there was no guarantee. It could be evidence that Tomasella did not consider it important that Holmes be afforded a chance to verify that the defective trees were defective or had died. Or it could be evidence that Tomasella was careless about notification. But there is no other evidence in this record to support a conclusion that the testimony that the trees died was false or that the trees in fact lived. For this reason, it is concluded that the delay in notification was connected with other matters discussed above, especially the reasonableness of the reliance of Tomasella upon the authority of Mr. Leal, and that the 39 trees did die.
Recommendation It is therefore recommended that the Department of Agriculture and Consumer Services enter its final order that Respondent, M. Tomasella and Company of Florida, Inc. pay to Holmes Garden Associates, Ltd., the sum of $7,619.50 plus 1.5 percent per month on overdue invoices computed as stated in conclusion of law 16 DONE and ENTERED this 17th day of November, 1987. WILLIAM C. SHERRILL, JR. 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 17th day of November, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NUMBER 87-2572A The following are rulings upon finding of fact proposed by the parties which have been rejected in this Recommended Order. The numbers correspond to the numbers of the proposed findings of fact as used by the parties. Findings of fact proposed by Holmes: The paragraph is an issue of law, not fact. The first sentence is an issue of law, not fact. 9.c. The paragraph is an issue of law, not fact. Mr. Knecht only admitted to "probably" having a copy of the price list. The second paragraph is rejected for lack of evidence that particular invoices in composite P. Ex. 8 were in fact received by Tomasella. (Mr. Knecht's testimony did not identify which invoices were in fact received by Tomasella.) The fifth sentence of the first paragraph is rejected because Mr. Knight admitted having been told of the 39 dead trees in the late spring or early summer, which is earlier than the July 29, 1986, letter. The second paragraph is rejected because it is based upon P. Ex. 5, which is an offer of compromise a claim. The petitioner seeks to rely upon this letter to establish the unreasonableness of the reliance of Tomasella upon the authority of Mr. Leal to offer a guarantee, and thus uses the letter to prove absence of liability. The offer of compromise letter was allowed into evidence over the objection of Tomasella that it was inadmissible pursuant to section 90.501., Fla. Stat., which excludes from evidence offers of compromise when offered to prove the absence of liability. The objection was taken under advisement pending a determination of how Holmes would rely upon the letter. The objection is now sustained. The last sentence and footnote 4 are not statements of fact. The sentence pertaining to dog guarantees is argument, there having been no evidence in the record concerning customs in the pet shop industry, and the footnote is speculation. The proposed finding that Mr. Knight spoke to Mr. Murrian or his secretary as to why Tomasella has not paid its account cannot be made because not recorded in the Hearing Officer's notes or memory, and there is no transcript. 12. The first paragraph is either a statement of contentions or matters of law. Findings of fact proposed by Tomasella: 2. Mr. Leal did not quote a delivery charge of $400. The finding that Mr. Leal stated the condition that he be allowed to visit the site to inspect the handling of the trees was not mentioned by Mr. Murrian in his testimony, and is only contained in a letter prepared by Mr. Knecht, who had no personal knowledge of what Mr. Leal said. It therefore is rejected as not supported by credible evidence. This proposed finding is rejected by finding of fact 28. The proposed finding that Tomasella gave Holmes an opportunity to inspect the 39 trees that Tomasella said had died is rejected because not supported by the credible evidence in the record. See findings of fact 42 through 47. The notice came too late to do any good. COPIES FURNISHED: Richard C. McCrea, Esquire Carlton, Fields, Ward, Emmanuel, Smith, Cutler & Kent, P.A. Post Office Box 3239 Tampa, Florida 33601 William W. Chastain, Esquire Trapp, Farrance, Chastain & Uiterwyk Post Office Box 222 Tampa, Florida 33601 Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32399-810 Robert Chastain, Esquire General Counsel Department of Agriculture and Consumer Services 435 Carlton Building Tallahassee, Florida 32399-0800 =================================================================
The Issue The issue is whether the claims of $98,935.20 and $19,147.70, filed by Petitioner under the Agricultural Bond and License Law, are valid. §§ 604.15 - 604.34, Fla. Stat. (2008).
Findings Of Fact At all material times, Petitioner has been a producer of agricultural products located in Plant City, Florida. At all material times, American Growers has been a dealer in agricultural products. Respondent Lincoln General Insurance Company, as surety, issued a bond to American Growers, as principal. American Growers is licensed by the Department of Agriculture and Consumer Services ("DACS"). Between December 16, 2008, and February 4, 2009, Petitioner sold strawberries to American Growers, each sale being accompanied by a Passing and Bill of Lading. Petitioner sent an Invoice for each shipment, and payment was due in full following receipt of the Invoice. Partial payments have been made on some of the invoices, and as of the date of this Recommended Order, the amount that remains unpaid by American Growers to Petitioner is $117,982.90, comprising: Invoice No. Invoice Date Amount Balance Due 103894 12/16/08 $7,419.00 $1,296.00 103952 12/22/08 $18,370.80 $1,944.00 103953 12/23/08 $3,123.60 $648.00 193955 12/26/08 $8,164.80 $1,728.00 103984 12/28/08 $28,764.40 $28,764.40 104076 12/31/08 $17,236.80 $17,236.80 104077 1/5/09 $17,658.00 $17,658.00 104189 1/5/09 $1,320.90 $1,320.90 104386 1/20/09 $16,480.80 $16,480.80 104517 1/29/09 $17,449.20 $17,449.20 104496 2/4/09 $13,456.80 $13,456.80 TOTAL $117,982.90
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order requiring Respondent, American Growers, Inc., and/or its surety, Respondent, Lincoln General Insurance Company, to pay Petitioner, Crown Harvest Produce Sales, LLC, the total amount of $117,982.90. DONE AND ENTERED this 18th day of May, 2010, in Tallahassee, Leon County, Florida. S JEFF B. CLARK 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 18th day of May, 2010. COPIES FURNISHED: Honorable Charles H. Bronson Commissioner of Agriculture and Consumer Services The Capital, Plaza Level 10 Tallahassee, Florida 32399-0810 Richard D. Tritschler, General Counsel Department of Agriculture and Consumer Services 407 South Calhoun Street, Suite 520 Tallahassee, Florida 32399-0800 Christopher E. Green, Esquire Department of Agriculture and Consumer Services Office of Citrus License and Bond Mayo Building, Mail Station 38 Tallahassee, Florida 32399-0800 Glenn Thomason, President American Growers, Inc. 14888 Horseshoe Trace Wellington, Florida 33414 Katy Koestner Esquivel, Esquire Meuers Law Firm, P.L. 5395 Park Central Court Naples, Florida 34109 Renee Herder Surety Bond Claims Lincoln General Insurance Company 4902 Eisenhower Boulevard, Suite 155 Tampa, Florida 33634 Glenn C. Thomason, Registered Agent American Growers, Inc. Post Office Box 1207 Loxahatchee, Florida 33470
The Issue The issue in this case is whether Petitioner should be granted an exemption from disqualification from employment with a private contractor providing adult day training to developmentally disabled clients of Respondent.
Findings Of Fact From April 2016 to October 2016, Petitioner Bertha Delaney ("Delaney") was employed by Cypress Place, Inc. ("Cypress"), a private, nonprofit corporation that provides services to developmentally disabled clients, and operates under the regulatory jurisdiction, of Respondent Agency for Persons with Disabilities ("APD"). Delaney was hired by Cypress as a receptionist, and her responsibilities included answering the phones, handling clerical tasks such as maintaining attendance sheets and filing, and assisting other employees as needed. Cypress operates an adult day training program, which offers "adult day training services" to APD clients. Such services include "training services that take place in a nonresidential setting, separate from the home or facility in which the client resides, and are intended to support the participation of clients in daily, meaningful, and valued routines of the community. Such training may be provided in work-like settings that do not meet the definition of supported employment." § 393.063(1), Fla. Stat. There is no persuasive evidence showing that, during her employment with Cypress, Delaney ever had face-to-face contact with a client while performing adult day training services. She was not, therefore, a "direct service provider" as that term is defined in section 393.063(13), Florida Statutes. Delaney did, however, have incidental, in-person interactions with clients, the evidence establishes, occasionally assisting clients in need of immediate help. Thus, although Delaney did not provide training services to clients, she provided some services in the broader sense of "helpful acts." In early August of 2016, an incident involving a client occurred at Cypress's facility, which the Department of Children and Families ("DCF") investigated. In the course of the investigation, the DCF investigator interviewed Delaney and learned that, because the subject client had appeared to be limping on the day in question, Delaney had helped the client walk from the bus to the building. At the time, Delaney had not yet undergone level 2 background screening because Cypress had not instructed her to do so. Rather, in or around April 2016, when she was hired, Cypress had required Delaney to go to the police department for a local criminal background check, which she did. Delaney, in fact, did everything that Cypress asked her to do with regard to background screening. Soon after (and perhaps because of) the DCF investigation, Cypress directed Delaney to submit to a level 2 background review, which she did.1/ And so it happened that in late August 2016, a search of Delaney's criminal history was performed, and the results were forwarded to DCF, which administers the background screening process for APD. By letter dated October 3, 2016, DCF notified Delaney that it had discovered her criminal conviction on a charge of grand theft of the third degree, to which she had pleaded no contest on June 13, 2001. This crime is a "disqualifying offense" under the applicable screening standards, which means that Delaney is ineligible to work as a direct service provider without an exemption from such disqualification. DCF advised Delaney that she needed to quit her job at Cypress and obtain an exemption from disqualification if she wanted to resume working there. Delaney promptly resigned her position with Cypress. Delaney then sought an exemption from disqualification from employment, submitting her Request for Exemption to DCF in November 2016. By letter dated March 17, 2017, APD informed Delaney that it intended to deny her request based solely on the ground that Delaney had "not submitted clear and convincing evidence of [her] rehabilitation." In other words, APD determined as a matter of ultimate fact that Delaney was not rehabilitated, which meant (as a matter of law) that the head of the agency had no discretion to grant an exemption.2/ APD did not, as an alternative basis for its proposed agency action, articulate any rationale for denying the exemption notwithstanding a showing of rehabilitation, assuming arguendo that such had been made. Delaney initiated the instant proceeding, hoping to prove her rehabilitation. The undersigned has considered the evidence as it relates to the statutory criteria for assessing rehabilitation, and makes the following findings of fact as a predicate for the ultimate determination. The Circumstances Surrounding the Criminal Incident. In or around September of 2000, Delaney stole cash receipts from her employer, Blockbuster Video, totaling approximately $13,800.00. She was soon arrested and charged with grand theft of the third degree, a felony offense as defined in section 812.014, Florida Statutes. At the time of the offense, Delaney, then 25 years old, was experiencing financial difficulties raising two young daughters. Although married, Delaney managed the household mostly on her own, as her husband, an interstate truck driver, was often on the road. Exercising what she now acknowledges was poor judgment, Delaney stole her employer's funds to ease her personal financial burden. On June 13, 2001, appearing before the Circuit Court in and for the Eleventh Judicial Circuit of Florida, Delaney entered a plea of nolo contendere to the criminal charge, was convicted by plea (adjudication withheld), and was sentenced to two years' probation with orders to make restitution in the amount of $13,778.00 to Blockbuster. Delaney completed her term of probation and complied with all of the other conditions imposed by the court, including the payment of restitution. The Time Period That Has Elapsed since the Incident. The disqualifying offense was committed about 17 years ago. Delaney thus has had ample time to restore her reputation and usefulness to society as a law abiding citizen following her conviction, and to mature into an older, more responsible adult. The Nature of the Harm Caused to the Victim. Delaney did not cause personal injury to any person in the commission of her crime. She was ordered to make restitution to the victim, and did, although the details of this transaction are not available in the record. Therefore, the economic harm caused by Delaney's theft appears to have been minimal. The History of the Applicant since the Incident. Since her conviction, Delaney has completed a training program to become a patient care technician and obtained a license to practice in Florida as a certified nursing assistant. She has held positions in these fields and performed admirably. Delaney lives with her two adult daughters, son-in-law, grandson, and fiancé; her current family situation is stable, both emotionally and financially. Her civil rights have been restored. She has not reoffended or otherwise run afoul of the law. APD severely faults Delaney for a so-called nondisclosure in her response to a question on the exemption request form concerning previous employment. The form asks the applicant to "provide your employment history for the last three years." Delaney answered, in relevant part, by stating: "I have not been employed for the last three (3) years." She followed this statement by describing employment predating "the last three (3) years" and explaining that an ankle injury in May 2013 (which required multiple surgeries to repair), together with the attendant convalescence and rehabilitation, had kept her out of the workforce for a couple of years. APD argues that Delaney lied about her employment history——it is undisputed that she had, in fact, worked (for Cypress) during the three years preceding her request for an exemption——and that this alleged "lie" proves Delaney had known not only that she was required to undergo level 2 background screening before taking the job with Cypress, but also that such screening would reveal her disqualifying criminal conviction, and that, therefore, to avoid detection, she had worked without being screened, in knowing violation of law. Put aside for the moment the issue of fact regarding whether Delaney "lied" about her employment history. APD's argument (that this "lie" is proof of Delaney's knowing violation of the background screening law) is illogical. For even if (as a matter of fact3/) Delany were required to be screened, and even if (as a matter of law4/) the background screening statutes were personally violable by an applicant or employee, Delaney's allegedly fraudulent answer to the employment history question does not rationally lead to the conclusion that she knew either of these premises to be true. Moreover, as discussed in endnote 1, it is unacceptable for an agency to rely upon an applicant's alleged violation of a regulatory statute as grounds to deny an exemption request where such alleged violation has never been proved in an enforcement proceeding. This is because any person charged with committing a disciplinable offense must be served with an administrative complaint and afforded clear notice of the right to a hearing, at which, if timely requested, the agency must prove the alleged wrongdoing by clear and convincing evidence. APD wants to skip all that and just have the undersigned find here, for the first time, that Delaney clearly violated section 393.0655 by working at Cypress for at least six months without being screened. See Resp.'s PRO at 9. That's not happening. The only relevant finding in this regard, which the undersigned makes, is that Delaney has never been found to have violated section 393.0655 by working at Cypress for at least six months without being screened. As for the alleged "lie," APD's position that Delaney's response to the employment history question was knowingly and intentionally false (by omitting reference to Cypress) does not make sense, because DCF already knew (from investigating an unrelated matter) that Delaney had worked for Cypress, and Delaney knew that DCF was aware of this fact when she filled out the form. That cat was out of the bag. At hearing, Delaney testified credibly and convincingly that she had not intended to mislead DCF. It is clear that she interpreted the question as asking about her employment during the three years before the job from which she had been disqualified (as opposed to the three years before completing the exemption request form). She misunderstood the question, to be sure, but it was an honest mistake, and the undersigned can appreciate how a person in Delaney's shoes could conclude that the job from which one has recently been disqualified does not "count" towards her employment history for purposes of seeking an exemption from disqualification. Delaney's testimony in this regard is corroborated by the fact that she submitted to DCF, as part of her exemption request package, two letters of recommendation from employees of Cypress, written on Cypress letterhead, attesting to her good character. These letters, taken together, make it clear that Delaney had recently been an employee of Cypress. Obviously, if Delaney had intended, knowingly, to deceive DCF by concealing her employment with Cypress, she would not have provided these letters. APD argues that one of these letters, from Rashard Williams, which is dated October 27, 2016, does not specifically indicate that Delaney ever worked at Cypress——and thus does not bolster Delaney's testimony that she never intended to conceal the fact that she had. To reach this conclusion one must discount the writer's statement that "Ms. Delaney has proven herself to be reliable, trustworthy, and compassionate both as a person and as an employee." If the Williams letter were the only written recommendation from a Cypress employee, however, the undersigned would consider APD's interpretation to be, while certainly not the best or most reasonable, at least plausible in view of Mr. Williams's additional comments about how well Delaney took care of his grandmother in a capacity, apparently, other than as an employee of Cypress. But the companion to the Williams letter, a recommendation from Mark Chmiel dated October 24, 2016, leaves no room for doubt that Delaney was a recent employee of Cypress. A short, two-sentence excerpt suffices to support this finding: "Bertha is an invaluable addition to our agency [i.e., Cypress,] and she has fulfilled the potential of her position far better than anyone before her. Her moral character is beyond reproach and I have no qualms about trusting her with our clients."5/ The letters of recommendation that Delaney furnished DCF refute the notion that she knowingly omitted Cypress from her employment history with the intent to mislead DCF. They prove, instead, that Delaney took for granted DCF's knowledge of her work for Cypress, for she was certain DCF already knew about it. In turn, that foundational assumption (which, in fact, was true) prompted Delaney to provide a history of her employment during the several years leading up to the job with Cypress. The undersigned finds that Delaney is not guilty of knowingly withholding material information from DCF in response to the question about her previous employment. Finally, the undersigned observes that APD, in its preliminary decision-making, impermissibly allowed speculation and conjecture to take the place of facts. In forming its intent to deny Delaney's application, APD took into account the "possibility that Ms. Delaney was trying to protect Cypress Place from demonstrating that they were in violation of the screening laws" as well as the "possibility that Rashard Williams might have tried to hide the fact [sic6/] that there was a violation of the screening requirements by Cypress Place." Resp.'s PRO at 10 (emphasis added). On the basis of this rank speculation, APD conjectured that "Ms. Delaney was willing to collude with [Cypress employees] in order not to spotlight their violation of the licensing law." Resp.'s PRO at 18. APD proved none of this imaginative guesswork. Circumstances Showing Applicant Poses No Danger. Yvonne Ginsberg, the executive director of Cypress, testified in support of Delaney's application. Ms. Ginsberg stated that Delaney was an "excellent" employee and affirmed that she had "no qualms" about Delaney's returning to work at Cypress once an exemption has been secured. The undersigned credits Ms. Ginsberg's testimony as to Delaney's character. In addition, Delaney submitted the written character references of Messrs. Chmiel and Williams, which were discussed above. These documents credibly attest to Delaney's trustworthiness, integrity, and ethical behavior. The undersigned finds without hesitation that Delaney would likely not present a danger in the future if an exemption from disqualification were granted. Ultimate Factual Determination The undersigned has determined, based on clear and convincing evidence, including sufficient persuasive evidence of rehabilitation, that Delaney should not be disqualified from employment because she is, in fact, rehabilitated.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Persons with Disabilities enter a final order granting Bertha Delaney the exemption from disqualification for which she is, in fact, eligible. DONE AND ENTERED this 18th day of August, 2017, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of August, 2017.
Findings Of Fact Respondent is a dealer in agricultural products and is licensed by the Department of Agriculture and Consumer Services, under Sections 604.15-604.34, Florida Statutes. On or about April 29, 1987, Steve Brill, who is a project manager and landscape architect employed by Respondent, placed an order with Petitioner, on behalf of Respondent, for various trees. The order was never reduced to writing by Respondent. Respondent ordered six dogwoods, one 18-foot ilex, three 13-foot ilex, 14 laurel oaks, and two ligustrums. Sandra Couey, who took the telephone order for Petitioner, informed Mr. Brill that he could have a higher quality $350 ligustrum or a lower quality $200 ligustrum. He chose the cheaper tree. Mr. Brill requested 18-foot dogwoods, but Ms. Couey informed him that the largest she had was 12 feet. On May 14, 1987, Respondent's driver picked up the trees at Petitioner's nursery. Ms. Couey had removed the ilex from the shipment because these trees, which had been purchased by her from another nursery, were of poor quality. The driver left a check in the amount of $3003, which, by prior agreement of the parties, was not to be deposited for 30 days. Alberto Ribas, president of Respondent, had asked Ms. Couey on the prior day to hold the check until the customer paid Respondent. Immediately upon receiving the shipment, Mr. Brill and Mr. Ribas noticed that the dogwoods were 12 feet and that the quality of the ligustrums were, in Mr. Brill's words, "shaky." Petitioner and Respondent did not communicate again until June 3, 1988, when Ms. Couey telephoned Mr. Ribas to see if she could deposit the check one week early. During the June 3 conversation or shortly thereafter, Mr. Ribas first complained to Ms. Couey about the quality of the trees. He stopped payment on the check and advised Ms. Couey that he intended to procure replacement trees elsewhere, for which Petitioner would be liable, if she did not replace the trees within seven days. Respondent ordered and Petitioner delivered six dogwood trees for a total agreed-upon price of $720, 14 laurel oak trees for a total agreed-upon price of $840, and two ligustrum trees for a total agreed-upon price of $400, which, plus tax, comes to a total of $2058. To date, Respondent has paid nothing of this amount.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a Final Order be entered requiring Respondent to pay Petitioner the sum of $2058. DONE and RECOMMENDED this 30th day of September, 1988, in Tallahassee, Florida. ROBERT E. MEALE 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 30th day of September, 1988. APPENDIX Treatment Accorded Respondent's Proposed Findings 1-2. Adopted. 3. First sentence adopted. Second sentence rejected as irrelevant. The dogwoods met the requirements of the contract or agreement between Petitioner and Respondent, regardless whether they met the requirements of Respondent's job. 4-5. Adopted in substance. 6-7. Rejected as irrelevant and against the greater weight of the evidence. 8. Adopted in substance. COPIES FURNISHED: Sandy D. Couey, Owner Southern Trees, Inc. Route 1 Box 60-J High Springs, Florida 32643 Stuart H. Sobel, Esquire Sobel & Sobel, P.A. Penthouse 155 South Miami Avenue Miami, Florida 33130 United States Fidelity & Guaranty Company Post Office Box 14143 Tampa, Florida 33623 Clinton H. Coulter, Jr., Esquire Department of Agriculture Consumer Services Mayo Building Ben Pridgeon Bureau of License & Bond Mayo Building Tallahassee, Florida 32399 Robert Chastain General Counsel Department of Agriculture and Consumer Services Mayo Building, Room 513 Tallahassee, Florida 32399-0810 Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32399-0810
The Issue Has Respondent Kelly Marinaro, d/b/a Sunny Fresh Citrus Export and Sales Company (Sunny) paid Petitioner Frances A. Oakes and Daniel Holder, d/b/a Oakes Produce Company (Oakes) in full for watermelons (melons) purchased from Oakes during the 1996 melon season which are represented by Sunny/Oakes purchase order numbers 93981/4051, 93905/4063, 93921/4064, 94006/4066, and 93941/4096?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: At all times pertinent to this proceeding, Oakes was in the business of growing and selling "agricultural products" as that term is defined in Section 604.15(3), Florida Statutes, and was a "producer" as that term is defined in Section 604.15(5), Florida Statutes. Melons come within the definition of "agricultural products" as defined in Section 604.15(3), Florida Statutes. At all times pertinent to this proceeding, Sunny was licensed as a "dealer in agriculture products" as that term is defined in Section 604.15(1), Florida Statutes. Sunny was issued license number 831 by the Department, which is supported by bond number BND-262218 in the amount of $29,000, written by American, as surety, with an inception date of May 1, 1996, and an expiration date of April 30, 1997. The complaint was timely filed by Oakes in accordance with Section 604.21(1), Florida Statutes. Sometime before June 27, 1996, the parties entered into an oral agreement wherein Oakes would harvest and load melons onto trucks furnished by Sunny at locations specified by Oakes. The agreement provided that: (a) Oakes would guarantee the quality of the melons to be the quality required under a "good delivery" standard at the time of delivery to Sunny's customers, subject to any transit problems or delays in arrival at the customer's location; (b) Sunny would pay Oakes Produce 4.5 cents per pound for the melons loaded onto the trailers and delivered to Sunny's customers; (c) Sunny would be responsible for the cost of delivering the melons to its customers; and (d) settlement was to be made by Sunny within a reasonable time. Frances Oakes testified that Sunny agreed to pay 5 cents per pound for the load of melons represented by Sunny/Oakes purchase order number 94006/4066. However, the more credible evidence is that the agreed upon price for this load of melons was 4.5 cents per pound. Likewise, Kelly Marinaro testified that it was agreed that if the melons did not met the agreed upon quality standard upon delivery to its customers that Oakes would be responsible for all cost of delivery, including freight. However, the more credible evidence is that this was not agreed upon and was not part of the oral agreement. Oakes did not advise Sunny that it would give Sunny "full market protection" on the melons, or that Sunny was to handle the melons "on account" for Oakes. The more credible evidence shows that the watermelons were purchased by Sunny with title to the melons passing to Sunny upon delivery to Sunny's customers and meeting the agreed upon quality standard. 8 Under the terms of the above oral agreement, Oakes loaded 9 loads of melons onto trucks furnished by Sunny that were shipped to Sunny's customers. Oakes alleged in the complaint that Sunny had failed to pay Oakes for 6 of the 9 loads and owed a balance of $9,521.36. However, at the beginning of the hearing, Oakes withdrew from the complaint the load of melons represented by Sunny Oakes/Oakes purchase order number 93924/4069 in the amount of $1,976.40 leaving an alleged balance owed to Oakes by Sunny of $7,544.96. The 5 loads of melons left in contention are the loads represented by Sunny/Oakes purchase order numbers 93891/4051, 93905/4063, 93921/4064, 94006/4066, and 93941/4096, in the amounts of $1,778.66, $2,044.80, $1,859.40, $91.70, and $1,770,40, respectively. Sunny contends that the melons on the loads represented by Sunny/Oakes purchase order numbers 93891/4051, 93905/4063, 93921/4064, and 93941/4096 arrived at their destination in a condition below the agreed upon quality standard which resulted in prices received by Sunny of less than the agreed upon price of 4.5 cents per pound. Based on this contention, Sunny deducted the freight, other applicable costs and its sales charge from the amount alleged to have been received for the melons represented by Sunny/Oakes purchase order numbers 93905/4063, 93921/4064, and 93941/4096, which resulted in Oakes not receiving any payment from Sunny for those melons. In fact, each of the 3 loads of melons showed a negative balance which was charged against other loads with a positive balance. The price received by Sunny for the load of melons represented by Sunny/Oakes purchase order number 93891/4051 resulted in a balance owed Oakes of $547.50 after deductions for freight and other charges. However, in making payment to Oakes, Sunny charged the negative balances of the loads represented by Sunny/Oakes purchase order numbers 93905/4063, 93921/4064 and 93941/4096 against Sunny/Oakes purchase order number 93891/4051, which resulted in Oakes not receiving any payment for this load. 13 As to the load represented by Sunny/Oakes purchase order number 94006/4066, Sunny paid Oakes $825.30, which represents 4.5 cents per pound for 18,340 pounds without any deduction for loads with negative balances. Oakes has been paid in full for this load. There was insufficient evidence to show that the melons represented by Sunny/Oakes purchase order numbers 93891/4051, 93905/4063, 93921/4064, and 93941/4096 did not meet the agreed upon quality standard upon arrival at their destination. There was no dispute as to the weight of the melons. Sunny furnished Oakes trouble reports on the 4 loads of melons represented by Sunny/Oakes purchase order numbers 93981/4051, 93905/4063, 93921/4064, and 93941/4096, indicating problems with the condition of the melons and that the loads would have to be "worked" in order to "move" the melons. Kelly Marinaro testified that either he or employees of Sunny had discussed at least 3 of these reports with Frances Oakes, and that he had authorized Sunny to do what was necessary to move the loads of melons. Frances Oakes testified that he had seen these trouble reports and had discussed at least some of them with either Kelly Marinaro or Sunny's employees. However, Frances Oakes further testified that he was not aware that there was a severe problem with the melons. The more credible evidence is that Kelly Marinaro or an employee of Sunny's discussed these trouble reports with Frances Oakes, and that Frances Oakes authorized Sunny to find someone to "work" the melons. In disposing of the melons, Sunny received less than the agreed upon price of 4.5 cents per pound. Therefore, Sunny deducted the freight, other applicable costs, and Sunny's sales charge which resulted in a negative balances of $81.84, $582.35, and $345.02 for loads represented by Sunny/Oakes purchase order numbers 93905/4063, 93921/4064, and 93941/4096, respectively. There was a positive balance of $547.50 for the load of melons represented by Sunny/Oakes purchase order number 93891/4051. By check dated August 1, 1996, Sunny made an accounting to Oakes which included the loads of melons in dispute and others that were not in dispute. Each purchase order number was listed on the check stub with either a positive or negative amount. The check was in the amount of $4,413.34. This amount was calculated by adding positive amounts and subtracting negative amounts. This was clearly shown on the check stub which Oakes received. On the back of this check Kelly Marinaro had clearly printed "Troubled Settlements Payment In Full" Using its deposit stamp which was stamped directly beneath the language "Troubled Settlements Payment In Full," Oakes deposited this check.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a Final Order dismissing Oakes' complaint. DONE AND ENTERED this 18th day of July, 1997, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6947 Filed with the Clerk of the Division of Administrative Hearings this 18th day of July, 1997. COPIES FURNISHED: Honorable Bob Crawford Commission of Agriculture The Capitol, Plaza Level-10 Tallahassee, Florida 32399-0810 Richard Tritschler General Counsel Department of Agriculture and Consumer Services The Capitol, Plaza Level-10 Tallahassee, Florida 32399-0810 Brenda Hyatt, Chief Bureau of Licensing and Bond Department of Agriculture and Consumer Services 508 Mayo Building Tallahassee, Florida 32399-0810 Frances A. Oakes, pro se 2722 Edson Avenue Fort Myers, Florida 33916 Arthur C. Fulmer, Esquire Post Office Box 2958 Lakeland, Florida 33806 Robert Walman Claims Management Services American Bankers Insurance Company of Florida 11222 Quail Roost Drive Miami, Florida 33157
The Issue Whether the Department of Insurance (Respondent) properly determined that John Deere Insurance Company, now known as Sentry Select Insurance Company (Petitioner), realized excessive profits pursuant to Section 627.215, Florida Statutes, for the calendar/accident years 1995, 1996 and 1997 in the amount of $571,197.00.
Findings Of Fact Petitioner, John Deere Insurance Company, is currently known as Sentry Select Insurance Company. It holds a Certificate of Authority to do business in the State of Florida as a foreign property and casualty insurer and was so licensed at all material times. Section 627.215, Florida Statutes, requires insurance companies writing workers’ compensation and employer’s liability insurance to file periodic reports with the Respondent. The reports are made using Respondent's Form DI4-15, which is adopted by Rule 4-189.007, Florida Administrative Code. Section 627.215, Florida Statutes, was enacted by the 1979 Legislature and became effective July 1, 1979. Chapter 79-40, Laws of Florida. The statute was passed as part of a wage loss reform whose purpose was to change the benefits structure for workers’ compensation insurance and to "pass-on" benefits of the reductions to the employers who purchase workers’ compensation insurance. From its inception, Section 627.215, Florida Statutes, has required insurers to file workers’ compensation and employer’s liability insurance data with Respondent prior to July 1 of each year. The data which is required includes "calendar year" earned premium, "accident year" incurred losses and loss adjustment expenses, administrative and selling expenses incurred in or allocated to Florida for the calendar year, and policyholder dividends applicable to the calendar year. Section 627.215(1), Florida Statutes. Effective October 1, 1988, the Legislature amended Section 627.215, Florida Statutes, by adding commercial property and casualty insurance to the statute. Chapter 88-390, Laws of Florida. The operative terms of Section 627.215, Florida Statutes, which had previously applied only to workers’ compensation and employer’s liability insurance, were then applied to commercial property and casualty insurance as well. Under Section 627.215, Florida Statutes, as amended in 1988, commercial property and casualty experience was to be reported to Respondent on a rolling three-year basis in the same manner as workers’ compensation and employer’s liability insurance. Losses and loss adjustment expenses were also valued in the same manner for all four lines of business; that is, not at the end of the three-year compilation period, but one year after the conclusion of the three-year compilation period. Section 627.215(2) and (3), Florida Statutes (Supp. 1988). All four lines of insurance were then to be combined for determining whether there were excessive profits under the statute. Section 627.215(7), Florida Statutes (Supp. 1988). The 1995 Legislature then added Subsection (14) to Section 627.215, Florida Statutes. Section 627.215(14), Florida Statutes, became effective June 14, 1995. Chapter 95-276, Laws of Florida. Subsection (14) states that Section 627.215, Florida Statutes, no longer applies to commercial property and casualty insurance as of January 1, 1997. The Legislature made a further clarification in 1997, making clear that commercial umbrella liability was included as a part of commercial property and casualty. Subsequent to that legislative change, Respondent issued Bulletin 97-012 dated October 9, 1997, which advised insurance companies that the Legislature had passed Senate Bill 840. It stated that, by law, Respondent would not be able to use a profit and contingencies factor less than zero. It also clarified that commercial property and casualty insurance specifically included commercial umbrella liability insurance. The terms "calendar year" and "accident year" are actuarial terms of art. A premium may be "written" (that is, collected) in one calendar year, but not fully "earned" until the succeeding calendar year, when the one-year period of the insurance policy is complete. A calendar year-earned premium, therefore, is the premium associated with a policy representing the portion of the policy expiring during a given year. Because losses and loss adjustment expenses are not fully paid in the same calendar year in which the pertaining accidents are reported, losses and loss adjustment expenses are monitored on both a "paid" and estimated basis over time and attributed to the year in which the pertaining accidents are reported--that is, the "accident year," which is January 1 through December 31. Losses and loss adjustment expenses are then valued as of December 31 of the first year following the latest accident year. Section 627.215(2), Florida Statutes. A loss development factor is a factor that the company uses to take the losses as they exist today and project them into the future at what it ultimately expects to pay on a claim. Generally, a loss development factor is calculated based on historical data and historical patterns of development. A company can project its own loss development factor, including its own workers’ compensation data in Florida or it can use the factors published by the National Council on Compensation Insurance ("NCCI"), if it does not have sufficient experience to project losses. However, the company must be able to justify whatever loss development factors it chooses to use. NCCI’s circulars are provided to their affiliated companies and those circulars include its loss development factors, but NCCI advises the companies that whatever factors they use, they must be able to justify their use to Respondent. The choice of loss development factors directly affects the calculation of losses which affects what a company owes for excess profits. Petitioner was an affiliated company of NCCI. The data which is filed on a yearly basis is for the three years prior to the most recent accident year. Section 627.215(2), Florida Statutes. This results in the reporting of a "rolling" three-year experience period; for example, 1993-1995, followed by 1994-1996, followed by 1995-1997. Applied to 1995-1997, which is the experience period at issue in this case, Section 627.215, Florida Statutes, therefore, operates to require calendar/accident years 1995-1997 be calculated as to losses and loss adjustment expenses as of December 31, 1998, and the filing of Form DI4-15 by July 1, 1999. The six-month period between the valuation and the report being due to Respondent is to allow companies to gather data, do an evaluation, complete the form, and file it with Respondent. During the six-month period, the company also develops its losses and loss adjustment expenses to an ultimate basis. Generally, excessive workers’ compensation profits result where the insurance company’s "underwriting gain" for workers’ compensation exceeds its "anticipated underwriting profit" plus five percent. Section 627.215(7)(a), Florida Statutes. Since January 1, 1997, Respondent has not taken commercial property and casualty experience into account when calculating a company’s workers’ compensation and employer’s liability excessive profits, nor has it combined commercial property and casualty with workers’ compensation and employer’s liability in making a determination of excessive profits. During the time period when workers’ compensation and employer’s liability experience were combined with commercial property and casualty to determine if excessive profits were owed by an insurer, Respondent maintained two separate sections for review of the data. Workers’ compensation had its own reporting forms, rule, analysis, and staff; and commercial lines had its own reporting forms, rule, analysis, and staff. Each section would conduct analysis of the data and make a determination as to whether excessive profits had been realized in the applicable line of insurance. Respondent then combined its work product to make an overall determination of whether excessive profits were owed. At the time that Respondent reviewed commercial property and casualty excess profits reporting, such reports were required to be on Form DI4-358, adopted by rule of Respondent. That form is not used anymore because the law ceased to apply to commercial property and casualty experience as of January 1, 1997. For the workers’ compensation calendar/accident years 1995-1997 at issue in this case, Petitioner timely submitted its Form DI4-15 to Respondent along with the required certification, explanations, and supporting data dated June 16, 1999. The form appropriately contained only data for workers’ compensation and employer’s liability experience. No commercial property and casualty data was submitted to Respondent at that time. By letter dated November 19, 1999, Respondent was notified by Petitioner of the acquisition of John Deere Insurance Company and the name change to Sentry Select Insurance Company. John Deere Insurance Company was headquartered in Moline, Illinois, prior to its acquisition. The John Deere operations in Moline, Illinois, were discontinued. Accounting records were transferred to Stevens Point, Wisconsin. Actuarial records were also transferred to Stevens Point, Wisconsin, in 2000. Using the data submitted, Respondent generated a report dated January 3, 2000, indicating a total of $571,197.00 in workers’ compensation and employer’s liability excessive profits for 1995-1997. Respondent then issued a Notice to Petitioner dated April 6, 2000, alleging the sum of $571,197.00 was owed to Petitioner’s policyholders in excessive profits. On May 4, 2000, Respondent received a fax from Petitioner's employee Diane Huber advising that the Petitioner had left off some numbers for its residual market. These numbers should have been included in the DI4-15 report which was due by July 1, 1999; however, Respondent was willing to consider these numbers because it appeared that the omission of the data was a clerical oversight, and such data is routinely considered by Respondent. By including the residual market data, Petitioner’s excess profits would be reduced to $488,150. By cover letter dated June 14, 2002, Petitioner submitted what was represented as the company’s commercial and property casualty experience for 1995 and 1996 to Respondent, on Form DI4-358, along with revised workers’ compensation data. This was the first commercial documentation submitted to Respondent. Neither the workers’ compensation nor the commercial data were accompanied by a certification, explanations, or supporting data. Form DI4-15 is adopted by reference, along with its instructions, by Rule 4-189.007, Florida Administrative Code. The revised workers’ compensation data proposed two changes to the excess profits calculation: The first was to change the loss development factors and the ultimate losses for each of the accident years, and the second was the proposal to include the residual market data. The net effect of those two changes is that Petitioner’s excess profits increase to $672,488.00. Ms. Patricia Ferguson, a statistical manager with Sentry Insurance Group, made the modifications to the workers’ compensation data and compiled the commercial property and casualty data, which was not an original submission of John Deere. Ferguson agrees that using the revised loss development factors and the direct method of calculation raises Petitioner’s workers’ compensation excess profits to $672,488.00. The method of loss development used by Ferguson was the "incurred including IBNR." IBNR stands for "incurred but not reported." Upon review of the commercial data submitted by Petitioner, it was determined that Petitioner only submitted data for calendar/accident years 1995 and 1996 and nothing for 1997, which should have been included in the calculation, assuming that commercial property and casualty data were still being collected. Ferguson concedes that she did not include the 1997 data because per the statute, commercial data could not be included to calculate excess profits for that year. If Respondent were to apply the excess profits statute as it once functioned to the commercial data for years 1995- 1997, the situation is worse than for the prior years 1994-1996, because the valuation date for 1995-1997 is two years after the law ceased to apply to commercial property and casualty experience and the filing date is two and a half years beyond when the law ceased to apply. The June 14, 2002, commercial data does not include any numbers for countrywide data, although Petitioner did do business in states other than Florida. The form on its face requires a derivation of IBNR loss reserves which was not provided (Line 7). Also on its face, the form requires that a derivation be attached for the profit and contingencies factor (Line 17). None was provided. Unlike the workers’ compensation experience submission, the commercial lines filing does not contain a certification or any explanations or supporting documents. On July 12, 2002, Petitioner submitted a revised Form DI4-358, also prepared by Ferguson. Assuming that the commercial portion of the law was still in effect, the revised Form DI4-358 would have been late because it would have been due July 1, 1999. Even with the revisions to countrywide data and expense numbers in the Florida line, the company is still only reporting data for 1995 and 1996. There was still no derivation included for the profit and contingencies factor. An Explanation of Methodology was included, but it was a carbon copy of the one prepared by John Deere for the prior filing and did not have sufficient details to evaluate the reasonableness of the IBNR calculation. Ferguson concedes that she does not know who wrote the explanation and that neither the claims reporting patterns nor the historical data was provided to Respondent. Further, the development triangles referenced in the explanation and the historical patterns to develop case reserves were not provided either. Loss development triangles are helpful to actuaries in that they assist the actuary in evaluating the appropriateness of the IBNR number. Petitioner’s allocated loss adjustment expense reserves were not determined by adding up a series of numbers by accident year, but were instead "spread" across the accident years using a ratio of countrywide split by accident year, which is contrary to the appropriate method of calculating those reserves. Petitioner’s countrywide commercial auto liability unallocated loss adjustment expenses are greater than the countrywide numbers shown in Petitioner’s Schedule P of their annual statement. For calendar/accident year 1995, the number on the revised DI4-358 form is $657,000.00 greater than what is on the company’s Schedule P. For calendar/accident year 1996 the number on the revised DI4-358 form is $916,000.00 greater than what is on the company’s Schedule P. Schedule P is the countrywide all-inclusive total for the company. This is an audited number; therefore, it is not possible or appropriate for the countrywide number on the revised DI4-358 form to be greater than what appears on the company’s Schedule P. Petitioner’s countrywide commercial auto liability allocated loss adjustment expense reserve for calendar/accident year 1996, is $836,000.00 greater than what is found on Schedule P of the company’s annual statement. The countrywide number on the revised DI4-358 form should not be greater than what appears on the company’s audited Schedule P. Much of the documentation supplied by Petitioner included computer-generated numbers which were then crossed out and replaced by hand-written numbers, with no explanation being provided for the changes. The paid losses for Florida for calendar/accident years 1995, 1996, and 1997 do not have the appropriate level of detail or underlying documentation (as there is for 1998) to show the source of those numbers. Regarding how the numbers for Florida paid loss, paid allocated expense, and loss reserves to case outstanding and IBNR outstanding were derived in the four-page document entitled, Summary of Data Used in P&C Florida John Deere Excessive Profits Filing as of 12/31/98, statements are made that indicate that there is an unknown problem with the source of the documents from which to get the information to fill out the DI4-358 form. In some instances, Ferguson did not have the data and had to estimate to get the accident year numbers to put on the form. ("However, the paid loss and paid ALE were off in total to page 15. The difference is with the transportation part. One thing is that the fiche for JDTSI included the outside adjusters for the ALE paid, and the page 15 data does not. Not sure what causes the paid loss difference. We had total numbers for optional and floaters, but did not have accident year data, so had to estimate that split.") On July 15, 2002, Petitioner submitted another revised version of its workers’ compensation data which proposed adjustments to reflect reinsurance calculations. Reinsurance was not a factor in the submission received by Respondent on June 14, 2002. These revisions have the effect of reducing the company’s excess profits to $467,846.00. Such a result is not possible because Petitioner is not ceding the amount of premium for reinsurance to a non-affiliated company. Petitioner is ceding it to affiliated companies, Rock River Insurance Company and John Deere Casualty Company, under an intercompany pooling arrangement. Under circumstances where Respondent has allowed credit to be taken for reinsurance, such reinsurance has been purchased from a company that is not affiliated or within the company’s group. Respondent has never knowingly allowed a company to cede premiums to an affiliate and thereby exclude that amount from its excess profits. Reporting for excess profits net of reinsurance has only been allowed for non-affiliated companies and the credits are only proper in those instances because the money leaves the company. Neither the pooling arrangement nor reinsurance contracts have been provided to Respondent, and Petitioner’s pooling arrangement affects prior years’ losses because the agreement was entered into in 1997, yet it affects losses for prior years. Further, Petitioner in this revised version, while adding reinsurance, is still using the loss development factors based on direct losses, so there is a "mismatch" between the loss development factor and how it is calculated and the losses to which it is applied. Reinsurance contracts must be reviewed to confirm the existence of reinsurance, the time period for that reinsurance, and the amounts available to the insurer. Ferguson is not familiar with the reinsurance arrangements and has never seen the contracts to verify their existence or terms. She was just told to do it that way. John Deere Insurance Company was acquired in October 1999, by Sentry Insurance Group and then renamed Sentry Select Insurance Company. The former officers of John Deere Insurance Company were replaced, as were certain operating personnel. The individual who is responsible for the content of supporting documentation for the DI4-358 form submitted on June 14, 2002, is not known. The sum of Petitioner’s evidence in support of its 1995 and 1996 commercial property and casualty experience is the DI4-358 form submitted on June 14, 2002, by Ferguson who states that she never worked for John Deere Insurance Company, is not an actuary, that none of the people in the Sentry Select Insurance Company accounting department worked for John Deere Insurance Company, and that she can’t say the records were directly transferred from John Deere Insurance Company to Sentry Select Insurance Company. Holly Lauer is an assistant comptroller with Sentry Select Insurance Company. She has worked with the company for 22 years and has never been employed by anyone else. Lauer was never employed or worked for John Deere Insurance Company. She is licensed as a CPA in Wisconsin, not in Florida, and she is not an actuary. Further, Lauer was not involved and had nothing to do with the transfer of the actuarial work product of John Deere Insurance Company. Lauer did, however, agree that there could be documentation (that is, accident year loss data and documentation) kept by an insurance company’s actuarial department that would not be included in that same insurance company’s accounting department and that that could have been the case with John Deere Insurance Company. Even assuming that the law currently applies to commercial property and casualty excess profits, Petitioner's supporting documentation is insufficient to allow an actuarial determination of what the correct numbers would be for underwriting profit or underwriting loss. Pursuant to the information supplied by Petitioner (taking into account the residual market and allowing for the change in NCCI loss development factors to the correct years), the company owes workers’ compensation excessive profits in the amount of $672,488.00.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order finding that Petitioner has realized excessive profits for calendar/accident years 1995, 1996 and 1997 in the amount of $672,488.00. DONE AND ENTERED this 15th day of November, 2002, in Tallahassee, Leon County, Florida. DON W. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of November, 2002. COPIES FURNISHED: Elenita Gomez, Esquire Richard M. Ellis, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Frank J. Santry, Esquire Granger, Santry & Heath, P.A. 2833 Remington Green Circle Post Office Box 14129 Tallahassee, Florida 32317 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
The Issue The issue is whether Petitioner’s performance under its lawn care service contract with the Department of Management Services was deficient, and, if so, whether the amounts deducted by the Department from the monthly payments made to Petitioner under the contract were reasonable and appropriate.
Findings Of Fact Petitioner provides lawn care services to residential and commercial properties in the central Florida area. Andre Smith is Petitioner’s owner and president. In November 2004, the Department entered into a contract with Petitioner for lawn care services at nine Department buildings. The contract was awarded to Petitioner through a competitive procurement process in which Petitioner was the low bidder. The contract number was ITN No. 26-991- 490-Z. Petitioner was to be paid a total of $7,384.92 per month under the contract. Each of the nine buildings was apportioned a specific amount of the total price in the contract. The scope of work under the contract generally included lawn care services, open field mowing, and irrigation system maintenance. The lawn care services required under the contract included mowing, edging, weed control, fertilizing, watering, shrub and tree pruning, mulching, and clean-up. The contract specified the frequency that the services were to be performed. Mowing was to be done weekly between April and November, and every two weeks between December and March; hedges and shrubs were to be trimmed at least monthly unless more frequent trimming was required for aesthetic reasons; and mulching was to be done in March and September. The contract required Petitioner to take soil samples at the beginning of the contract and annually thereafter. The results of the soil samples were to be used to determine whether Petitioner needed to apply iron, lime, or other minerals to the lawns. The contract required Petitioner to inspect each building’s irrigation system at the beginning of the contract, and required Petitioner to provide a report to the building manager regarding any repair work needed on the system. Petitioner was also required to check the irrigation system on every visit to ensure that it was operating properly. The contract required Petitioner to apply pre-emergent weed control and fertilizer. The weed control was to be applied in the spring and the fall, and the fertilizer was to be applied three times during the year on an agreed upon schedule. The mulching required by the contract was to be done in March and September. The mulch was to be maintained at a depth of four inches throughout the year. The contract required Petitioner to use cypress mulch. The day-to-day operation of the buildings subject to the contract was the responsibility of on-site building managers, not the Department staff in Tallahassee. The building managers were responsible for the direct oversight of Petitioner’s work under the contract, and they were also responsible for reviewing and evaluating Petitioner’s performance. Petitioner began providing services under the contract in December 2004. Petitioner received full payment from the Department for the services that it provided from December 2004 through March 2005, even though several of the building managers were not satisfied with Petitioner’s performance under the contract during that period. Several of the building managers spoke with Mr. Smith regarding their concerns with Petitioner’s performance under the contract. They also documented Petitioner’s performance deficiencies on the monthly summary report forms that the contract required Petitioner to submit in order to obtain payment. Starting in April 2005, the building managers were required to fill out evaluation forms in addition to the monthly summary report forms. The impetus for the creation and use of the evaluation forms was Petitioner’s continuing unsatisfactory performance under the contract. The building managers used the evaluation forms to rate Petitioner’s performance as “good,” “fair,” or “poor” on the 20 categories of service that Petitioner was required to perform under the contract. Each service was assigned an equal weight -- e.g., one twentieth or five percent of the contract -- and if all 20 services were not applicable to a particular building, the weight assigned to each service was adjusted accordingly. The evaluation form was developed by Kris Parks, who was the contract administrator for Petitioner’s contract. Ms. Parks developed the form on her own. She did not get the input of the building managers in developing the form, and Mr. Smith was not consulted regarding the development of the form. The evaluation forms were used by Ms. Parks in conjunction with the monthly summary report forms in order to reduce the payments made to Petitioner under the contract. Each service for which Petitioner was given a “poor” rating by a building manager resulted in a five percent deduction in the amount paid to Petitioner. Typically, a “poor” rating reflected work that was not performed at all by Petitioner, rather than work that was performed unsatisfactorily. In some situations, a smaller deduction was made if the comments on the evaluation form or the monthly summary report form reflected partial performance despite the “poor” rating. For example, if Petitioner received a “poor” rating for mowing, but the comments reflected that Petitioner provided services twice during the month rather than the required four times, the deduction was 2.5 percent rather than five percent. The reduction of payments under the contract for unsatisfactory performance or unperformed work is specifically authorized by Section 3.13 of the contract. Section 3.13 of the contract states that the monthly summary report form “will be used by [the building managers] to track performance of services, in order to determine a proportional deduction in payment for services that are not performed as agreed” in the contract. It does not mention any other form. The contract does not define “proportional deduction” and it does not include the methodology to be used in calculating the deduction. The contract is silent on those issues. Petitioner’s contract with the Department was amended in May 2005 to reduce the number of buildings that Petitioner served from nine to three. The three remaining buildings were the ones closest to Petitioner’s business location in Lakeland, i.e., the Hargrett and Trammel Buildings in Tampa and the Peterson Building in Lakeland. The reduction in the scope of the contract was the result of Petitioner’s continuing unsatisfactory performance under the contract, and it reflected the Department’s well- founded view that Petitioner was not able to handle all nine buildings. The Department staff was trying to help Mr. Smith by allowing Petitioner to retain a portion of the contract rather than canceling the contract altogether based upon Petitioner’s poor performance. The invoices submitted by Petitioner for April 2005 through July 2005 were as follows: $7,384.92 (April); $7,384.92 (May); $1,938.64 (June); and $1,938.64 (July). The April and May invoices were based upon the nine buildings served by Petitioner in those months. The June and July invoices were based upon the three buildings served by Petitioner in those months. The Department did not pay the invoices for April 2005 through July 2005 in full. It paid Petitioner $2,451.782 for April (33.2 percent of the invoice), $835.82 for May (11.6 percent), $453.393 for June (23.4 percent), and $904.66 for July (46.7 percent). The amounts deducted -- $4,933.14 for April; $6,531.10 for May; $1,485.25 for June; and $1,033.98 for July -- were based upon the Department’s determination that Petitioner failed to perform certain work under the contract. The amounts deducted were calculated by Ms. Parks using the information provided to her by the building managers on the evaluation forms, as described above. The letters by which the Department informed Petitioner of the payment reductions advised Petitioner that it “may have the right to an administrative hearing regarding this matter, pursuant to Sections 120.569 and 120.57(1), Florida Statutes.” The letters explained what Petitioner was required to do to request a hearing and advised Petitioner that the "[f]ailure to timely request a hearing will be deemed a waiver of [the] right to a hearing." Petitioner timely filed letters challenging the deductions for April, June, and July 2005. The total deductions for those months were $7,452.37. Petitioner did not file anything challenging the deduction for May 2005. Therefore, the $6,531.10 deduction for that month is not at issue in this proceeding. Petitioner is not entitled to the full amount billed to the Department for April, June, and July 2005 because all of the services required under the contract were not performed during those months. Mr. Smith conceded this point in his testimony at the final hearing.4 Mr. Smith contended at the hearing that the amounts deducted by the Department were not reasonable in light of the services that Petitioner did provide. However, Mr. Smith did not identify what he would consider to be a reasonable deduction for the work that Petitioner admittedly did not perform. Petitioner routinely failed to provide mowing services at each of the buildings at the intervals required under the contract. For example, Petitioner only mowed one time during the month of June 2005 at the Hargrett and Trammel Buildings, rather than the four times required under the contract. Petitioner did not put down mulch at any of the buildings in March 2005, as required by the contract. When the building managers asked Mr. Smith about the mulch, he told them that he would get to it. Mr. Smith testified that he was told by the Department staff in Tallahassee that the mulch could be put down in any month so long as it was done twice a year. That uncorroborated, self-serving testimony was not persuasive. Petitioner put down mulch at some, but not all of the buildings in April and May 2005. The mulch that Petitioner put down did not cover all of the areas requiring mulch and it was not put down at the required four-inch depth. At the Trammel Building, for example, the mulch put down by Petitioner was less than half of that required by the contract. No mulch was ever put down at the Hurston Building in Orlando or the Grizzle Building in Largo. Petitioner’s performance was often deficient in regards to trimming and clean-up of debris. For example, on one occasion at the Trammel Building, Petitioner left more than 60 bags of leaves in and around the building’s dumpster; at the Hargrett building, there were overhanging tree limbs that went untrimmed for an extended period; and Petitioner routinely failed to do trimming at the Grizzle Building, although he did a good job picking up debris at that building. The services provided by Petitioner at the Trammel Building got so bad that the building manager had to hire another company at a cost of approximately $1,800 to clean up the site so that it would be presentable for an event in the vicinity of the building that was attended by a U.S. Senator and other dignitaries. The building managers were never given the results of the soil samples that Petitioner was required to take at the beginning of the contract even though they repeatedly requested that information. When Mr. Smith was asked about the soil samples by the building managers, he told them that he would get them done. Mr. Smith claimed at the hearing that he sent the results of the soil samples to the Department staff in Tallahassee, although he could not recall whom specifically he sent the results to, and he offered no documentation to corroborate his testimony on this issue. Petitioner’s testimony regarding the soil samples was not persuasive. The Department’s witnesses credibly testified that they never received the results of the soil samples from Petitioner. Indeed, the evidence was not persuasive that Petitioner ever took the soil samples required by the contract. The print-outs presented at the final hearing, Exhibit DMS-11, do not have any identifying information that would corroborate Mr. Smith’s testimony that the samples described in the print- outs were from the buildings that were the subject of the contract.5 Moreover, the print-outs are dated March 8, 2005, which is more than four months after the samples were supposed to have been taken by Petitioner, and several of the soil samples had pH levels outside of the range set forth in the contract. Mr. Smith testified that Petitioner applied fertilizer and pre-emergent weed control at each of the buildings, as required by the contract. That uncorroborated, self-serving testimony was not persuasive. The more persuasive evidence establishes that Petitioner did not apply fertilizer or pre-emergent weed control. On this issue, the building managers credibly testified that they were never advised by Mr. Smith that the fertilizer or pre-emergent weed control was being applied, even though those services were to supposed be performed pursuant to a schedule agreed upon with the building managers; the building managers credibly testified that they did not observe any signs that fertilizer had been applied, such as the greening of the grass; and fertilizer could not have been applied at the Hurston Building without killing all of the grass because the fertilizer needs to be watered into the lawn, and the sprinkler system at the building was not working at the time. Petitioner failed to perform the required inspection of the irrigation system at several of the buildings, including the Hurston Building, at the beginning of the contract in order to determine whether any repairs needed to be done. The system at the Hurston Building did not work for an extended period of time, which caused large sections of grass around the building to die from a lack of water. The performance deficiencies described above were cited on the monthly summary report forms and the evaluation forms completed by the building managers, which in turn were used by Ms. Parks to calculate the amount deducted from the monthly payments made to Petitioner under the contract. Petitioner was responsible for the costs of the mulch, fertilizer, and pre-emergent weed control required under the contract. The money that Petitioner “saved” by not providing those services likely exceeds the amounts deducted by the Department pursuant to Section 3.13 of the contract. For example, the mulch purchased by Petitioner for the Trammell Building cost approximately $2,250, and that was only half of the mulch needed for that building alone. Petitioner is no longer providing lawn care services to the Department under the contract. The contract was revoked based upon Petitioner’s unsatisfactory performance. The revocation of the contract, which occurred at some point prior to August 2005, is not at issue in this proceeding.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services issue a final order rejecting Petitioner’s challenge to the payment reductions made by the Department for the months of April, June, and July 2005. DONE AND ENTERED this 3rd day of November, 2006, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd of November, 2006.
