13-001977F Gulf Coast Development Service, Inc. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed DOAH Final Order on Friday, December 6, 2013.

Summary: Respondent was substantially justified in issuing a Stop-Work Order and, therefore, Petitioner's claim for an award of attorney's fees and costs is denied.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GULF COAST DEVELOPMENT SERVICE,

INC. ,

Petitioner ,

vs. Case No. 13 - 1977F

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF

WORKERS ' COMPENSATION ,

Respondent .

/

FINAL ORDER

Pursuant to notice, a f inal hearing was held in this case on

October 25, 2013, in Tallahassee, Florida, before Administrative

Law Judge, Linzie F. Bogan, of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Thomas L. Dick ens, Esquire

Dickens and Dunn, P.L.

517 East College Avenue

Tallahassee, Florida 32301

For Respondent: Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

STAT EMENT OF THE ISSUE

Whether Respondent, Department of Financial Services ,

Division of Workers ' Compensation (Department or Respondent),

should pay Petitioner , Gulf Coast Development Service, Inc. ' s

(Petitioner or Gulf Coast Development), attorney ' s fees and costs

under section 57.111, Florida Statutes (2012), 1/ for initiating

Division of Administrative Hearings (DOAH) C ase N o. 13 - 0798.

PRELIMINARY STATEMENT

The parties hereto were litigants in the case of Department

of Financial Services, Division of Workers ' Compensation v. Gulf

Coast Development Services, Inc. , DOAH C ase N o. 13 - 0798. The

underlying prosecution was dismissed by the Department , and Gulf

Coast Development seeks , in the instant matter , an award of

attorney ' s fees and costs pursuant to section 57.111.

During the final hearing, Petitioner offered testimony from

Brian Fischer, Quang Dinh, and Belinda Milton. Respondent

offered testimony from Leida Perez, Ralph Douglas, Jr., and

Kristian Dunn. Respondent ' s counsel testified as to limited

matters pertaining to the amount of fees sought by Petitioner and

was subject to cross examination. Petitioner ' s Exhibits 1 and 2

were admitted into evidence. Respondent ' s Exhibits 1 through 4,

6, 11 and 15 were also admitted into evidence.

A Transcript of the proceeding was filed with DOAH on

November 7, 2013. On November 18, 2013, the parties each filed a

proposed final order, and the same were considered in the

preparation of this Final Order.

FINDING S OF FACT

1. The parties stipulated to the following fact s set forth

in this paragraph:

A) The Department is the state agency responsible for

enforcing the statutory requirement that employers

secure the payment of workers ' compensation for the

benefit of their employees and corporate officers.

B) Petitioner, a Florida corporation, was engaged in

the Florida construction industry on February 12,

2013.

C) On February 12, 2013, Leida Perez, workers '

compensation compliance investigator for the

Department (Investigator Perez), commenced an

investigation at 577 Gu lfshore B oulevard , Naples,

Florida 34102 (job site), to determine whether the

individuals performing construction industry work

at the job site were compliant with the workers '

compensation insurance coverage requirements of

c hapter 440, Florida Statutes.

D) Quang Dinh is the owner and corporate officer of

Gulf Coast Development.

E) The Department issued a Stop - Work Order and Order

of Penalty Assessment to Petitioner on February 12,

2013.

F) The Department served a Request for Production of

Business Reco rds for Penalty Assessment Calculation

to Petitioner on February 12, 2013.

G) The calculations and the methodology applied by

the Department ' s penalty auditor in the Amended

Order of Penalty Assessment that was issued to

Petitioner by the Department on Fe bruary 27, 2013,

and revoked on May 3, 2013, are not in dispute.

Petitioner does not owe any Amended Order of

Penalty Assessment to the Department.

H) Bob Simat, drywall supervisor for Advantage

Plastering and Finish Carpentry, contacted Gilberto

Zepeda directly to perform the drywall operations

at the job site . Mr. Simat was under the

impression that Mr. Zepeda and his brother both

worked for Gulf Coast Development.

I) Discovery in this matter concluded on April 29,

2013, when the Department received c heck images

from Petitioner ' s bank account.

J) The Department issued and served an Order

Releasing Stop - Work Order (Revocation) to

Petitioner on May 3, 2013.

K) Petitioner is a bona fide " small business " and

incurred legal fees and costs for this action.

L) The Department revoked the February 12, 2013,

Stop - Work Order, and , therefore , Petitioner is the

prevailing party in the underlying action within

the meaning of section 57.111(3) (c) .

2. On February 12, 2013, when Investigator Perez arrived at

the jo b site, she observed Gilberto and Enrique Zepeda (Zepedas)

performing drywall finishing work. Upon inquiry, the Zepedas

informed Investigator Perez that they were performing the drywall

finishing work for their employer, Gulf Coast Development , and

provid ed her with Quang Dinh ' s cellular phone number.

3. As previously noted, Investigator Perez is an

investigator with the Department ' s Division of Workers '

Compensation. When Investigator Perez arrived at the job site on

February 12, 2013, a representati ve from the Department ' s

Division of Insurance Fraud (Fraud Unit) was also present. In

the presence of Investigator Perez, the representative from the

Fraud Unit received from the Zepedas the same information that

they provided to Investigator Perez regar ding their employment

status with Gulf Coast Development. While meeting with

Investigator Perez and the representative from the Fraud Unit,

the Zepedas memorialized their verbal statements by each

executing an affidavit , and affirmatively stating therein that

they were employed by Petitioner.

4 . Soon after receiving Mr. Dinh ' s phone number from the

Zepedas, Investigator Perez phoned Mr. Dinh. When Mr. Dinh

answered his phone, Investigator Perez identified herself and

explained that she was with the Z epeda brothers. During the

conversation with Mr. Dinh, Investigator Perez asked who m he used

for workers ' compensation coverage. Mr. Dinh replied " I am working

on it , " and the phone was disconnected. Investigator Perez

immediately placed a second call t o Mr. Dinh , and it was during

this conversation that Mr. Dinh agreed to meet her at the job site .

5. After speaking with Mr. Dinh, Investigator Perez

contacted Advantage Plastering, a contractor at the job site, who

informed her that they had hired Peti tioner to perform the drywall

finishing work.

6. Following her conversation with the representative from

Advantage Plastering, Investigator Perez, through the use of her

mobile personal computer, searched the Department of State,

Division of Corporatio ns ' , website database ( S unbiz) for

information on Gulf Coast Development.

7. The information found on S unbiz showed that Petitioner

had been an active Florida corporation since May 9, 2007, that

27614 Imperial Shore B oulevard , Bonita Springs, Florida 341 34,

was the company ' s principal address , and that Quang Dinh was

president of the corporation.

8. Next, Investigator Perez checked the Department ' s

Coverage and Compliance Automated System (CCAS) for information

on proof of coverage and exemptions for Petitioner. CCAS

revealed that Petitioner did not have any active coverage , but

did have an exemption for Mr. Dinh.

9. An exemption is a method by which a particular corporate

officer can become exempt from the requirement to obtain workers '

compensati on insurance coverage , as authorized by section 440.05,

Florida Statutes.

10. When Mr. Dinh arrived at the job site , Investigator

Perez again asked him about the company ' s current workers '

compensation coverage, to which Mr. Dinh again replied, " I am

work ing on it. " Mr. Dinh then gave Investigator Perez a folder

containing a blank application for workers ' compensation

insurance coverage.

11. Based on her interviews with the Zepedas, Advantage

Plastering , and Mr. Dinh, along with the information obtaine d

from S unbiz and CCAS, Investigator Perez determined that the

Zepeda brothers were employed by Petitioner and that the Zepedas

were not covered by workers ' compensation insurance coverage.

Given this information, Investigator Perez issued Petitioner a

St op - Work Order.

12. Mr. Dinh testified that when he arrived at the job

site , he informed Investigator Perez that the Zepedas were not

his employees. Even if Mr. Dinh informed Investigator Perez that

the Zepedas were not employees of Gulf Coast Development , his

assertion was insufficient to negate the verbal and sworn

statements given to Investigator Perez by the Zepedas and,

moreover, conflicted with his previous statements to Investigator

Perez that he was " working on " getting workers ' compensation

covera ge for the Zepedas.

13. In March 2013, the Zepedas recanted their earlier

statements that they were employed by Gulf Coast Development. On

May 3, 2013, Respondent issued an Order Releasing Stop - Work Order

(Revocation).

14. The facts uncovered in Invest igator Perez ' s

investigation on February 12, 2013, provided the Department with

a reasonable basis to issue the Stop - Work Order to Petitioner.

CONCLUSIONS OF LAW

15. DOAH has jurisdiction in this proceeding pursuant to

sections 57.111(4), 120.569, and 12 0.57(1), Fla. Stat. (2013).

1 6. Section 57.111, the Florida Equal Access to Justice

Act, authorizes the award of attorney ' s fees and costs to a small

business party that prevails in an administrative proceeding

seeking review of or defending against unreas onable government

action by a state agency, i.e., when the state agency ' s actions

are not substantially justified and no special circumstances

exist that would make the award unjust. Section 57.111(3)(e)

defines substantial justification as a reasonable b asis in fact

and law.

1 7. The agency has the burden to prove substantial

justification. AHCA v. MVP Health, Inc. , 74 So. 3d 1141, 1143

(Fla. 1st DCA 2011); Helmy v. Dep ' t of Bus. and Prof ' l Reg. ,

707 So. 2d 366, 368 (Fla. 1st DCA 1998).

1 8. It was held i n AHCA v. MVP Health, Inc. , supra , at

1143 - 44:

[A]n agency cannot satisfy the " substantial

justification " standard simply by showing an

action was " not frivolous. " This is because

" while governmental action may not be so

unfounded as to be frivolous, it m ay

nonetheless be based on such an unsteady

foundation factually and legally as not to

be substantially justified. " Dep ' t of

Health & Rehab. Servs. v. S.G. , 613 So. 2d

1380, 1386 (Fla. 1st DCA 1993). On the

other hand, the standard is not so strict as

to require the agency to demonstrate that

its action was correct. Id. , quoting

McDonald v. Schweiker , 726 F.2d 311, 316

(7th Cir. 1983)(stating the government need

not have a " necessarily correct basis [] for

the position that it took " ). The

" substantial j ustification " standard lies

between these two extremes. The closest

approximation is that if a state agency can

present an argument for its action "' that

could satisfy a reasonable person[,] '" then

that action should be considered

" substantially justified . " Helmy , 707

So. 2d at 368, quoting Pierce v. Underwood ,

487 U.S. 552, 565, 108 S. Ct. 2541, 101 L.

Ed. 2d 490 (1998).

An additional consideration when evaluating

an agency ' s action under section 57.111 is

that the inquiry is limited only to whether

the agency had a " reasonable basis in law

and fact at the time " it took the action.

§ 57.111(3)(e), Fla. Stat. (2010) . . . .

(emphasis [in original] ). The reviewing

body -- whether DOAH or a court -- may not

consider any new evidence which arose at a

fees heari ng, but must focus exclusively

upon the information available to the agency

at the time that it acted. See Dep ' t of

Health, Bd. of Physical Therapy Practice v.

Cralle , 852 So. 2d 930, 932 (Fla. 1st DCA

2003)(criticizing an ALJ for being

" influenced by con sideration of evidence

which was presented at [a fees] hearing

rather than being focused solely on whether

the [agency ' s underlying] decision had a

reasonable basis in law and fact " ).

1 9. Using this legal standard, there was, on February 12,

2013, substan tial justification for the decision by Respondent to

issue a Stop - Work Order to Petitioner.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is ORDERED that the petition for attorney ' s fees and

costs is denied.

DONE AND ORDE RED this 6 th day of December , 2013 , in

Tallahassee, Leon County, Florida.

S

LINZIE F. BOGAN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 323 99 - 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 6 th day of December , 2013 .

ENDNOTE

1/ All subsequent references to Florida Statutes will be to 2012,

unless oth erwise indicated.

COPIES FURNISHED:

P.K. Jameson, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0307

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Servic es

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Thomas L. Dickens, Esquire

Dickens and Dunn, P.L.

517 East College Avenue

Tallahassee, Florida 32301

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled

to judicial review pursuant to section 120.68, Florida Statutes.

Review proceedings are governed by the Florida Rules of Appellate

Pro cedure. Such proceedings are commenced by filing the original

notice of administrative appeal with the agency clerk of the

Division of Administrative Hearings within 30 days of rendition

of the order to be reviewed, and a copy of the notice,

accompanied b y any filing fees prescribed by law, with the clerk

of the District Court of Appeal in the appellate district where

the agency maintains its headquarters or where a party resides o r

as otherwise provided by law.