08-002105 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Capella Ventures, Inc. Status: Closed Recommended Order on Wednesday, September 10, 2008.

Summary: Petitioner proved Respondent, a dissolved corporation, failed to secure workers` compensation insurance for its workers. The corporation, as opposed to its officers, remained liable for the debt.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS' COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 08-2105

)

CAPELLA VENTURES, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

On August 4, 2008, a hearing was held via videoconference in

Jacksonville and Tallahassee, Florida, pursuant to the authority

set forth in Sections 120.569 and 120.57(1), Florida Statutes.

The case was considered by Lisa Shearer Nelson, Administrative

Law Judge.

APPEARANCES

For Petitioner: Kristian Dunn, Esquire

Assistant General Counsel

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: Peter King

1446 Silver Street

Jacksonville, Florida 32206

STATEMENT OF THE ISSUE

Whether Respondent has committed the acts alleged in the

Stop Work Order and Order of Penalty Assessment and if so, what

penalty should be imposed.

PRELIMINARY STATEMENT

This case arose with the filing of a request for hearing on

a Stop Work Order and Order Penalty Assessment issued by the

Department of Financial Services, Division of Workers'

Compensation (The Department). The case was originally docketed

at the Division as Case No. 06-3355 and assigned to the

undersigned. On March 19, 2007, Case No. 06-3355 was closed

based on a Joint Motion of the parties that asserted they had

achieved a settlement. On April 21, 2008, the Department filed a

Motion to Re-Open the Case, alleging that the parties had reached

an impasse. On April 30, 2008, the case was re-opened as DOAH

Case No. 08-2105 and the parties were directed to provide several

mutually acceptable dates for hearing.

In a Joint Status Report, counsel for both parties notified

the undersigned that counsel for Respondent, Capella Ventures,

Inc. (Capella Ventures), had diligently attempted to contact his

client, with no response. The parties requested that a notice be

sent by the Division informing Respondent that it needed to

respond within a reasonable period of time or waive their

representation of counsel. The undersigned declined to issue

such an order, and directed the parties to the Uniform Rules of

Procedure governing motions for leave to withdraw.

Counsel for Respondent, Gordon Nicol, Esquire, filed a

Motion to Withdraw in accordance with Florida Administrative Code

Rule 28-106.105, and an Order issued granting the Motion to

Withdraw and requiring a response from Respondent. The Order,

sent to Peter King at 308 East 4th Street, Jacksonville, Florida

32206, was returned to the Division as undeliverable.

In order to ensure that the only known representative for

Capella Ventures, Inc., received notice of these proceedings, the

undersigned consulted the Secretary of State's website for the

Division of Corporations. The website indicted that an address

change for Respondent was filed with the Secretary of State's

office on August 17, 2006, and that Capella Ventures, Inc., filed

for voluntary dissolution on January 9, 2008. An Order issued

June 17, 2008, which chronicled the proceedings in this case and

required both parties to respond concerning whether proceedings

were still necessary.

Both parties responded to the Order. The Department

indicated its intention to file a Motion for Leave to Amend the

Style of the Case to reflect the new entity/person that Capella

Ventures has become. However, no such motion was filed.

Respondent filed a response through one of its officers, Peter

King, indicating he had not known the proceedings still existed.

Petitioner then filed an Unopposed Motion to Continue Final

Hearing based upon a scheduling conflict. The matter was

rescheduled to August 4, 2008, and proceeded as scheduled.

At hearing, the Department called one witness and Petitioner's

Exhibits numbered 1-5 were admitted into evidence. Respondent

presented one witness and no offered no exhibits. At the close

of hearing, the parties were directed to include in any proposed

recommended orders argument related to the responsibilities of a

dissolved corporation.

The hearing was recorded and the transcript was filed with

the Division on August 15, 2008. A Proposed Recommended Order

was timely filed by the Department; a late-filed Proposed

Recommended Order was filed by Respondent on September 8, 2008.

Both submissions have been carefully considered in the

preparation of this Final Order. All references are to the 2005

edition of Florida Statutes, unless otherwise indicated.

FINDINGS OF FACT

1. The Department is the state agency responsible for

enforcing the statutory requirement that employers secure

workers' compensation insurance for the benefit of their

employees. § 440.107, Fla. Stat.

2. On August 11, 2006, Robert Lambert, the Jacksonville

District Supervisor for the Division of Workers' Compensation,

Bureau of Compliance, was contacted by Katina Johnson, an

investigator for the Division. 1/

3. Based on the information provided to him by Ms. Johnson,

Mr. Lambert approved the issuance of a Stop Work Order against

Capella Ventures, Inc.

4. The investigator served a Stop Work Order and Order of

Penalty Assessment, both by posting at the worksite and by hand

delivery, on Capella Ventures. The Department investigator also

issued a Request for Production of Business Records for Penalty

Assessment, requesting records for a period of three years, from

July 31, 2003. These records were requested in order to

calculate the penalty required pursuant to Section 440.107,

Florida Statutes, for not having workers' compensation insurance.

The records were to be used in conjunction with the

classification codes contained in the Basic Manual (Scopes

Manual) published by the National Council on Compensation

Insurance.

5. Records were provided by Capella Ventures' counsel.

Based on the records provided, an Amended Order of Penalty

Assessment was prepared, assessing a penalty of $8,769.16.

6. Mr. Peter King was, at all times material to this case,

an officer of Capella Ventures, along with his father. His

father is now deceased.

7. Mr. King admitted that workers from Capella Ventures

were assisting his father with a construction project on a home

next to the home where they lived. He did not dispute that the

workers were performing construction work and that the company

had no workers' compensation coverage for them at the time. Nor

did he dispute the amount of the penalty reflected in the Amended

Order of Penalty Assessment. He contended that while his father

performed the framing on the property, one of the two other

employees did not have the skill to actually perform framing.

8. The class code used by the Department to determine the

appropriate penalty was 5645, which is used for carpentry

operations on residential structures. Use of this code was

appropriate.

9. Capella Ventures filed for an address change in August

of 2006, and voluntarily dissolved in January of 2008.

10. No evidence was presented regarding what actions were

taken by Capella Ventures with respect to the dissolution of the

corporation.

11. No evidence was presented regarding what, if any,

distribution of assets was undertaken at the time of dissolution.

12. No evidence was presented to indicate that any

successor corporation or entity was formed upon the dissolution

of Capella Ventures.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties to this

action in accordance with Sections 120.569 and 120.57(1), Florida

Statutes.

14. Given the penal nature of these proceedings, Petitioner

has the burden of proof and must demonstrate by clear and

convincing evidence that Respondent violated the Workers'

Compensation Law during the relevant period and that the penalty

assessment is correct. Department of Banking and Finance v.

Osborne Stern & Co. , 670 So. 2d 932 (Fla. 1996).

15. Every "employer" is required to secure the payment of

workers' compensation insurance for the benefit of its employees

unless exempted or excluded under Chapter 440, Florida Statutes.

§§ 440.10 and 440.38, Fla. Stat. "Employer" is defined in part

as "every person carrying on any employment." § 440.02(16),

Fla. Stat. An "employee" is defined as including "a partner or

partnership that is engaged in the construction industry."

§ 440.02(15)(c)4., Fla. Stat.

16. In accordance with Section 440.02(8), Florida Statutes,

the Department has adopted construction industry classification

codes contained in the Basic Manual (Scopes Manual) published by

the National Council on Compensation Insurance. Fla. Admin. Code

R. 69L-6.021. The Scopes Manual lists framing and carpentry as

parts of the construction industry.

17. Section 440.107(7), Florida Statutes, provides in

pertinent part:

(7)(a) Whenever the department determines

that an employer . . . has failed to secure

the payment of workers' compensation

required by this chapter or to produce the

required business records under subsection

(5) within 5 business days after receipt of

the written request of the department, such

failure shall be deemed an immediate serious

danger to public health, safety, or welfare

sufficient to justify service by the

department of a stop-work order on the

employer, requiring cessation of all

business operations. . . . The Department

may issue an order of conditional release

from a stop-work order to an employer upon a

finding that the employer has complied with

coverage requirements of this chapter and

has agreed to remit periodic payments of the

penalty pursuant to a payment agreement

schedule with the department. . . .

* * *

(d)1. In addition to any penalty, stop-work

order, or injunction, the department shall

assess against any employer who has failed

to secure the payment of compensation as

required by this chapter a penalty equal to

1.5 times the amount the employer would have

paid in premium when applying approved

manual rates to the employer's payroll

during periods for which it failed to secure

the payment of workers' compensation

required by this chapter within the

preceding 3-year period or $1,000, whichever

is greater.

18. The Department has met its burden of proof in

demonstrating that Respondent, Capella Ventures, violated the

provisions of Section 440.07, Florida Statutes. Moreover, the

method used by the Department for assessing the penalty is

mandated by Section 440.107, Florida Statutes.

19. At hearing, the parties were directed to include in

their proposed recommended orders argument regarding the effect

dissolution of Capella Ventures would have on these proceedings.

In the Department's Proposed Recommended Order, it claims that

the voluntary dissolution does not remove the liability attached

to its prior activity. It points to Florida Administrative Code

Rule 69L-6.031 (Stop Work Orders in Effect Against Successor

Corporations or Business Entities). However, Rule 69L-6.031 was

adopted initially on October 29, 2006, after the events occurred

in this case. While the rule has no application to the events

giving rise to this case, the rule specifically implements

Section 440.07(7)(b), Florida Statutes, which provides in

pertinent part:

(b) Stop work orders and penalty assessment

orders issued under this section against a

corporation, partnership, or sole

proprietorship shall be in effect against any

successor corporation or business entity that

has one or more of the same principals or

officers as the corporation or partnership

against which the stop-work order was issued

and are engaged in the same or equivalent

trade or activity.

20. There is no evidence presented in this case to indicate

that there is any successor corporation or business entity

engaged in the same or equivalent trade or activity. While the

Stop Work Order and Order of Penalty Assessment would clearly

apply to such an entity, this provision has no application where,

as here, there is no indication that such a successor entity

exists.

21. Respondent points to the limitation of liability

contained in Section 607.1405, Florida Statutes. That provision,

which describes the effect of corporate dissolution, states in

pertinent part:

607.1405 Effect of dissolution.--

(1) A dissolved corporation continues its

corporate existence but may not carry on any

business except that appropriate to wind up

and liquidate its business affairs,

including:

(a) Collecting its assets;

(b) Disposing of its properties that will

not be distributed in kind to its

shareholders;

(c) Discharging or making provision for

discharging its liabilities;

(d) Distributing its remaining property

among its shareholders according to their

interests; and

(e) Doing every other act necessary to wind

up and liquidate its business and affairs.

(2) Dissolution of a corporation does not:

(a) Transfer title to the corporation's

property;

(b) Prevent transfer of its shares or

securities, although the authorization to

dissolve may provide for closing the

corporation's share of transfer records;

(c) Subject its directors or officer's to

standards of conduct different from those

prescribed in ss. 607.0801-607.0850 except as

provided in s. 607.1421(4);

(d) Change quorum or voting requirements for

its board of directors or shareholders;

change provisions for selection, resignation,

or removal of its directors or officers or

both; or change provisions for amending its

bylaws;

(e) Prevent the commencement of a proceeding

by or against a corporation in its corporate

name;

(f) Abate or suspend a proceeding by or

against a corporation on the effective date

of dissolution; or

(g) Terminate the authority of the

registered agent of the corporation.

(3) The directors, officers and agents of a

corporation dissolved pursuant to s. 607.1403

shall not incur any personal liability

thereby by reason of their status as

directors, officers, and agents of a

dissolved corporation, as distinguished from

a corporation which is not dissolved.

22. While Capella Ventures has dissolved, the corporation,

to the extent that it has assets, is still responsible for debts

incurred prior to its dissolution. In re Southern Cinemas, Inc. ,

256 B.R. 250, 259 (Bank. M.D. Fla. 2000) (Florida law allows a

corporation to temporarily exist beyond dissolution; the Florida

Legislature did not intend for a corporation's debts to disappear

upon dissolution). That being said, Section 607.1405(3) makes it

clear that the debt remains the debt of the corporation and does

not impose individual liability on the remaining shareholders.

See also § 607.1406 (14) ("The aggregate liability of any

shareholder of a dissolved corporation . . . may not exceed the

amount distributed to the shareholder in dissolution.").

Moreover, in this case, the Department has not brought action

against the individual shareholder. It has limited its action to

the now dissolved corporation, Capella Ventures. Any attempt to

collect against the individual shareholder is beyond the scope of

this proceeding.

RECOMMENDATION

Upon consideration of the facts found and conclusions of law

reached, it is

RECOMMENDED:

That a final order be entered finding that Respondent,

Capella Ventures, Inc., violated Section 440.107, Florida

Statutes, by failing to secure workers' compensation for its

employees, and assessing a penalty of $8,769.16.

DONE AND ENTERED this 10th day of September, 2008, in

Tallahassee, Leon County, Florida.

S

LISA SHEARER NELSON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 10th day of September, 2008.

ENDNOTE

1/ Ms. Johnson no longer works for the Department, and while the

Investigative Report she prepared was accepted into evidence

without objection, the narrative portion of her report is clearly

hearsay. Unless it supplements or corroborates other evidence

presented, the narrative summary cannot form the basis for a

finding of fact. § 120.57(1)(c), Fla. Stat.

COPIES FURNISHED:

Kristian E. Dunn, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

Peter King

1446 Silver Street

Jacksonville, Florida 32206

Alex Sink, Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-4229

Daniel Sumner, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-4229

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this recommended order. Any exceptions to

this recommended order should be filed with the agency that will

issue the final order in this case.