14-003960 Plastic Tubing Industries, Inc. vs. Advanced Drainage Systems, Inc., And Department Of Health Status: Closed Recommended Order on Friday, December 19, 2014.

Summary: No variance for rules that do not apply to variance applicant. Variance on fairness ground for rule setting minimum area of drainfields. BOP on variance applicant to prove entitlement by preponderance. Economic injury OK for standing.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PLASTIC TUBING INDUSTRIES, INC.,

Petitioner,

vs. Case No. 14 - 3960

ADVANCED DRAINAGE SYSTEMS, INC.,

AND DEPARTMENT OF HEALTH,

Respondents.

_______________________________/

RECOMME NDED ORDER

On October 13 and 14 , 2014, Robert E. Meale, Administrative

Law Judge of the Division of Administrative Hearings (DOAH),

conducted the final hearing in Tallahassee, Florida.

APPEARANCES

For Petitioner: David C. Ashburn, Esquire

Greenburg Traurig, P.A.

101 East College Avenue

Post Office Drawer 1838

Tallahassee, Florida 32302

For Respondent Advanced Drainage Systems, Inc.:

Joseph R. Miller, Esquire

Vorys, Sater, Seymour

and Pease, LLP

52 East Gay Street

Columbus, Ohio 43215

Daniel E. Nordby, Esquire

Shutts & Bowen LLP

215 South Monro e Street, Suite 804

Tallahassee, Florida 32301

For Respondent Department of Health:

Amanda G. Bush, Esquire

Department of Health

4052 Bald Cypress Way, BIN A - 02

Tallah assee, Florida 32399 - 1703

STATEMENT OF THE ISSUE S

The issues are whether Petitioner's substantial interests

are determined by the issuance of the subject variance to

Respondent Advanced Drainage Systems, Inc. (ADS) for the sale of

an alternative drainfie ld system in Florida and whether, pursuant

to section 120.542, Florida Statutes, on the grounds of

substantial hardship or unfairness, ADS is entitled to this

variance from three provisions of Flori da Administrative Code

Rule 64E - 6.009(7) that, as to onsit e sewage treatment and

disposal systems (OSTDSs), require innovative system testing and

prohibit an alternative drainfield system with an area smaller

than the area required for a mineral - aggregate drainfield.

PRELIMINARY STATEMENT

On March 25, 2014, ADS f iled a Petition for Variance

(Petition). After Respondent Department of Health (DOH)

requested additional information, ADS filed a Revised Petition

for Variance on April 21, 2014 (Revised Petition).

The Revised Petition requests variances from three

pro visions of Florida Administrative Code Rule 64E - 6.009(7). The

three provisions are rule 64E - 6.009(7), which, according to the

parties, impliedly requires "innovative system testing" to

precede any approval by DOH of an OSTDS alternative system;

r ule 64E - 6.009(7)(a)4., which requires the submittal to DOH of

"empirical data" from "innovative system testing" prior to DOH's

approval of an OSTDS a lte rnative system; and r ule

64E - 6.009(7)(d), which prohibits the use of an alternative

drainfield system with an ar ea smaller than the area required for

a mineral - aggregate d rainfield specified in rule 64E - 6.014.

The requested variance would allow ADS to sell in Florida,

without innovative system testing, an alternative drainfield

system with an area smaller than the area required for a mineral -

aggregate drainfield. The Revised Petition states that the

proposed alternative drainfield system is similar to an

alternative drainfield system that has been installed in Florida

for ten years and has functioned adequately. The Revised

Petition claims that additional testing of the proposed

alternative drainfield system is thus unnecessary, would be

unfair, and would constitute a substantial hardship.

By Order Granting Petition for Variance filed July 15, 2014

(Variance Ord er), DOH granted t he requested variance from rule

64E - 6.009(7), 64E - 6.009(7)(a)4., and 64E - 6.009(7)(d) on the

grounds that requiring ADS to com ply with this rule would be

unfair and present a substantial hardship. The Variance Order

declined to grant a va riance from the requirement in rule

64E - 6.009(7)(e) requiring the labeling of product components

because the proposed alternative drainfield product would meet

this requirement. 1/ Lastly, the Variance Order determines that

the purpose of the underlying s tatute -- section 381.0065 -- will be

met because ADS's proposed alternative drainfield system would be

"functionally equivalent" to a previously approved alternative

drainfield system that has been installed in Florida for several

years.

The product of a fr ee - form agency proceeding, 2/ the Variance

Order comprises 11 numbered paragraphs of findings of fact and

five numbered paragraphs of conclusions of law. The first three

paragraphs of findings of fact recite the three subject rule

provisions for which the variance is sought. The remaining

findings of fact briefly describe ADS's proposed "alternative

drainfield product" 3/ for which ADS seeks the variance, the

successful performance in Florida of a similar alternative

drainfield system, and ADS's claim that requiring further testing

of its alternative drainfield system would thus be unfair and

present a substantial hardship.

The first two conclusions of law recite provisions of

sections 120.542 and 381.0065, which are discussed in the

Conclusions of Law. T he remaining conclusions of law have been

discussed above. The Variance Order grants the requested

variance from the three rule provisions on the condition that ADS

offer a "limited warranty" on its alternative drainfield system. 4/

Regarding the variance from the rule provision governing the size

of drainfields, the Variance Order mandates that ADS's

alternative drainfield system will receive a rating equivalent to

three square feet of mineral - aggregate drainfield per linear foot

of pipe.

By Petition fo r Formal Administrative Proceedings filed

August 6, 2014 (Petition), Petitioner challenged the proposed

variance. The Petition alleges that the Variance Order must be

set aside for several reasons: 1) DOH published notice of the

Original Petition, but no t the Revised Petition, thus depriving

Petitioner of an opportunity to be heard on the Revised Petition;

2) the Variance Order fails to comply with section

381.0065(3)(e), which authorizes DOH to permit the use of a

"limited number" of innovative drainfiel d systems for a "limited

period of time , " if "compelling evidence" establishes that the

subject OSTDS will function properly and reliably to meet the

requirements of this section and the rules adopted pursuant to

this section; and 3) the Variance Order unl awfully waives the

requirements of section 381.0065(3)(e), which requires that an

applicant seeking approval of an innovative system comply with

all rule requirements.

The Petition alleges that Petitioner's substantial interests

are determined by the Vari ance Order in two respects. First,

Petitioner alleged that it will be forced to compete with ADS

under unfair circumstances arising from the failure of DOH to

require ADS to incur the substantial costs of innovative system

testing necessary to comply with rule 64 E - 6.009. 5/ Second,

Petitioner alleged that, as a member of the public, it will

suffer environmental harm from DOH's failure to require ADS to

subject its proposed alternative drainfield system to innovative

system testing and unspecified other rul e requirements that

protect the water resources.

In its Response to ADS's Motion to Dismiss filed on

September 12, 2014, Petitioner also argued that its substantial

interests are determined by the limitation on the number of

innovative systems authorized b y section 381.0065(3)(e) and the

addition of ADS's innovative systems, if it obtains the variance.

In the Joint Pre - hearing Stipulation filed on October 7,

2014, Petitioner identified the issues presented for

determination as the failure of ADS to have dem onstrated that

"the purpose of the underlying statute will be or has been

achieved by other means . . . and [the] application of the rule

[from which the variance is sought] would create a substantial

hardship or would violate principles of fairness." Pet itioner

also recited the standing allegations described above.

In the Joint Pre - hearing Stipulation, ADS argued that the

Variance Order is "supported by competent substantial evidence"

based on DOH's "detailed investigation" and "proper evaluation"

of the Revised Petition. ADS also contended that Petitioner

lacks standing.

In the Joint Pre - Hearing Stipulation, DOH noted that the

Variance Order is "based on competent substantial evidence," and

the variance is not a variance from the underlying statute

becau se ADS's proposed alternative drainfield system is not an

innovative system. 6/

The Joint Pre - hearing Stipulation identifies the agreed - upon

factual issues as whether Petitioner's substantial interests are

determined by the Variance Order and whether comp etent

substantial evidence supports DOH's determinations that:

1) ADS's proposed alternative drainfield system is functionally

equivalent to Petitioner's already - tested alternative drainfield

system, 2) the purpose of the statute underlying the three rule

provisions from which the variance is sought will be met by means

other than enforcement of these rule provisions, 3) the

enforcement of these rule provisions would be unfair or cause

substantial hardship, 4) DOH should gra nt the requested variance,

and 5 ) DOH should approve ADS's proposed alternative drainfield

product.

At the start of the hearing, the parties agreed that the

burden of proof rests with Petitioner to prove that DOH's

determinations were not supported by competent substantial

evidence. A s explained in the Conclusions of Law, the

Administrative Law Judge rejects this stipulation because it is

an erroneous statement of the law. 7/

At the hearing, Petitioner called four witnesses and offered

into evidence four exhibits: Petitioner Exhibits A , B, D, and E.

ADS called three witnesses and offered into evidence 38 exhibits:

ADS Exhibits A through F; G - 1 through G - 8 and G - 13 through G - 21;

and H through R. DOH called two witnesses and offered into

evidence 14 exhibits: DOH Exhibits A through N . The parties

offered six joint exhibits: Joint Exhibits A through F. All

exhibits were admitted. 8/

The court reporter filed the transcript on October 29, 2014.

The parties filed proposed recommended orders on November 10,

2014.

FINDING S OF FACT

1. I n the mid - 1990s, Petitioner developed a drainfield

system known as a Multi - Pipe System (MPS) as an alternative to

the standard mineral - aggregate drainfield. The MPS consists of

nine, eleven, or thirteen banded pipes constructed of four - inch,

corrugated, h igh - density polyethylene tubing. Installed

downgradient from a septic tank, the MPS retains the effluent

from the septic tank long enough for the oxygen in the soil to

treat the effluent's anerobic bacteria. After retaining the

effluent long enough for t his treatment to take place, the MPS

releases the effluent so it can percolate deeper into the ground

below the bottom of the drainfield.

2. Marketed as a space - saving alternative to a mineral -

aggregate drainfield, the drainfield area of the MPS is less than

the minimum drainfield area specified by rule 64E - 6.008 for a

standard mineral - aggregate drainfield. For this reason,

Petitioner sought DOH's approval of the MPS as an alternative

drainfield system under rule 6 4E - 6.009 (Alternative System or,

more s pecifically, Alternative Drainfield System).

3. In addition to being a proposed Alternative System, the

MPS was also an "innovative sys tem," as referenced in rule

64E - 6.009(7), so DOH required Petitioner to conduct over two

years' innovative system test ing and submit to DOH the empirical

data obtained from this testing. Petitioner did so, and DOH

approved the MPS, with its reduced - size drainfield area, for sale

and installation in Florida.

4. A relatively small company, Petitioner entered into a

licens e agreement with ADS in 2001 for the latter to produce and

market the MPS in Florida. ADS subsequently sold at least 10,000

MPSs from 2001 until 2011 when the license agreement terminated.

Aft er Petitioner's patent on the MP S expired in 2014, ADS sought

approval from DOH to market its own version of the MPS known as

the Septic Stack.

5. The Petition, Revised Petition, and Variance Order have

been described above in the Preliminary Statement. DOH published

notice of its receipt of the Petition in the Flo rida

Administrative Register. Although DOH did not publish notice of

its receipt of the Revised Petition, it did publish notice of the

Variance Order in the Florida Administrative Register. The

Variance Order provides persons whose substantial interests are

determined by the proposed order a point of entry for requesting

an administrative hearing on material issues of fact. Nothing in

the record suggests that a third party had any right or

opportunity to participate in the free - form agency proceeding

tha t preceded the issuance of the Variance Order.

6. Like the MPS, the Septic Stack is a space - saving

alternative to the standard mineral - aggregate drainfield. The

Septic Stack also consists of nine, eleven, or thirteen banded

pipes constructed of four - inch , corrugated, high - density

polyethylene tubing.

7. Over the years, the thousands of MPSs that have been

installed in Florida have proved that this Alternative Drainfield

System operates adequately by protecting public health and the

water resources of Flo rida. Although there is some dispute

between Petitioner and ADS as to the specifications of the MPS

that Petitioner licensed ADS to sell for installation in Florida,

the MPS that ADS manufactured and that was installed in Florida

is identical to the Septi c Stack in terms of the perforated area

punched into each length of pipe , an important feature in the

proper performance of these Alternative Drainfield Systems. A

small difference exists between the Septic Stack and the MPS in

terms of the width of the s traps holding the tubing in place

during and after installation. Although the proper performance

of these two Alternative Drainfield Systems requires that the

pipes remain banded together, the small difference in the width

of the banding straps is immater ial to their performance.

8. The Septic Stack is the functional equivalent of the

MPS. Because the MPS has adequately protected public health and

the water resources, which are t he relevant statutory purposes,

as stated in the Conclusions of Law, the pr oposed variance would

achieve the purpose of the statute by other means than those

means set forth in the rule provisions from which the variance is

sought.

9. Consideration of hardship and fairness issues is

complicated by the fact that, as discussed i n the Conclusions of

Law, the Septic Stack is not an innovative system, so it is not

subject to innovative system testing under rule 64E - 6.009(7) and

64E - 6.009(7)(a)4. The following two paragraphs are necessarily

conditional, assuming, for the sake of dis cussion, that DOH had

properly determined that the Septic Stack requires a variance

from the rule requiring innovative system testing. In this

conditional case, requiring ADS to provide empirical data from

innovative system testing would not produce a sub stantial

hardship or be unfair to ADS by affecting it in a manner

significantly different from the way that these rule provisions

affect similarly situated persons that are subject to the rule.

10. ADS has argued that the application of the rule would

res ult in a substantial financial hardship. The record does not

include an approximate cost of innovative system testing. If DOH

had determined that the Septic Stack were not the functional

equivalent of the MPS, the difference between these two

Alternative Drainfield Systems would necessarily have been very

slight, so any innovative element of the Septic Stack would not

have required extensive or costly testing. Additionally, the

record includes nothing about the net worth or revenues of ADS.

There is thu s no basis whatsoever for determining that innovative

system testing itself would present a substantial financial

hardship for ADS.

11. ADS claims that the time required for innovative system

testing would present a substantial financial hardship. The

record does not indicate how long such testing would take.

Again, if DOH had determined that the Septic Stack were not the

functional equivalent of the MPS, the difference between these

two Alternative Drainfield Systems would necessarily have been

very s light, so any innovative element of the Septic Stack would

not have required lengthy testing. It is thus impossible to

estimate lost sales resulting from innovative system testing, nor

is it possible to determine whether the lost profits, if any,

from the se sales would present a substantial financial hardship

to ADS, given the absence of any evidence of the net worth or

revenues of ADS.

12. The record contains no indication of other hardships,

such as technical or legal, resulting from requiring ADS to

co nduct innovative system testing. As explained in the

Conclusions of Law, by proposing to grant ADS a variance from

rule 64E - 6.009(7) and (7)(a)4., DOH misapplies these two poorly

worded rule provisions. But DOH's misapplication of these rule

provisions d oes not create a statutorily recognized substantial

legal hardship. The solution is not for DOH to misinterpret its

rules and then grant variances due to the legal hardship arising

from its misinterpretation; the solution is for DOH to

acknowledge that th e innovative system testing provisions of rule

64E - 6.009(7) and (7)(a)4. do not apply to the Septic Stack

because the Septic Stack is not an innovative system.

13. ADS has argued that application of the innovative

system testing provisions of rule 64E - 6.0 09(7) and

6 4E - 6.009(7)(a)4. would be unfair. But, as to these two rule

provisions, the record fails to identify any person similarly

situated to ADS or, thus, any difference in the impact of the

rule on such a hypothetical person compared to the impact of the

rule on ADS. The only other drainfield manufacturer identified

in this case is Petitioner. The correct application of the

relevant provisions of rule 64E - 6.009(7) and (7)(a)4. required

Petitioner to conduct innovative system testing and submit the

e mpirical data to DOH because the MPS was an innovative system at

the time -- exactly what would be expected of ADS, if the Septic

Stack were in fact an innovative system.

14. Likewise, the application of rule 64E - 6.009(7)(d) to

the Septic Stack would not r esult in a substantial hardship of

any sort, but it would be unfair. As noted in the Preliminary

Statement, this rule provision prohibits the use of an

alternative drainfield with an area smaller than the area

required for a mineral - aggregate drainfield. As approved by DOH,

the MPS drainfield is smaller than the area of a mineral -

aggregate drainfield. The Septic Stack is functionally

equivalent to the MPS, so the literal application of this rule to

ADS's Septic Stack, but not to Petitioner's MPS, affects ADS in a

manner significantly different from the way it affects

Petitioner.

15. Lastly, Petitioner has proved that its economic

interests will suffer an injury in fact from the Variance Order.

The proof of economic injury is straightforward. The addi tion of

a competitor marketing a functionally equivalent Alternative

Drainfield System in Florida will reduce Petitioner's sales in

Florida. From the evidence produced by ADS in terms of lost

sales resulting from the delay that would have resulted from

in novative system testing, 9/ Petitioner's economic injuries would

not be in substantial if ADS markets the Septic Stack in Florida.

16. Petitioner has failed to prove any injury to any

environmental interests, of which Petitioner has demonstrated

none.

CON CLUSIONS OF LAW

17. In any case involving a disputed issue of material

fact, DOAH has jurisdiction when an agency's decision concerning

a variance request determines the substantial interests of a

person. §§ 120.542(8), 120.569, and 120.57(1), Fla. Stat. As is

evident in the Findings of Fact, this case presents disputed

issues of material fact. The closer question -- whether

Petitioner's substantial interests are determined by the Variance

Order -- is addressed at the end of the Conclusions of Law.

18. Pet itioner's notice argument is rejected as groundless.

Petitioner timely filed its Petition, so its ability to

participate in this formal administrative hearing was unaffected

by any deficiencies in the published notice of the Variance

Order. Nothing in th e record suggests that Petitioner was

entitled to participate in the free - form agency proceeding that

culminated in the issuance of the Variance Order, so Petitioner

was likewise unaffected by any deficiencies in the published

notice of receipt of either o f the petitions for variance.

19. In the typical administrative proceeding, ADS, as an

applicant, would bear the burden of proving the material

allegations by a preponder ance of the evidence. Dep't of Transp.

v. J.W.C. Co. , 396 So. 2d 778, 78 5 - 88 (Fla. 1 st DCA 1981);

§ 120.57(1)(j). This burden attaches to an applicant, regardless

of whether the proposed agency action is to grant or deny the

application, because the formal administrative proceeding is de

novo and not a review of proposed agency action. J.W. C. at

788 - 89. The present case raises the issue of whether , or the

extent to which , these administrative law principles apply to a

variance proceeding.

20. In framing the issues in terms of supporting competent

substantial evidence and allocating the burden of proof to

Petitioner, rather than ADS, the parties have been governed by

section 120.542(8), 10/ which provides:

An agency shall grant or deny a petition for

variance or waiver within 90 days after

receipt of the original petition, the last

ite m of timely requested additional material,

or the petitionerÓs written request to finish

processing the petition. A petition not

granted or denied within 90 days after

receipt of a completed petition is deemed

approved. A copy of the order granting or

de nying the petition shall be filed with the

committee and shall contain a statement of

the relevant facts and reasons supporting the

agencyÓs action. The agency shall provide

notice of the disposition of the petition to

the Department of State, which shall publish

the notice in the next available issue of the

Florida Administrative Register. The notice

shall contain the name of the petitioner, the

date the petition was filed, the rule number

and nature of the rule from which the waiver

or variance is sough t, a reference to the

place and date of publication of the notice

of the petition, the date of the order

denying or approving the variance or waiver,

the general basis for the agency decision,

and an explanation of how a copy of the order

can be obtained. The agencyÓs decision to

grant or deny the petition shall be supported

by competent substantial evidence and is

subject to ss. 120.569 and 120.57. Any

proceeding pursuant to ss. 120.569 and 120.57

in regard to a variance or waiver shall be

limited to the agency action on the request

for the variance or waiver, except that a

proceeding in regard to a variance or waiver

may be consolidated with any other proceeding

authorized by this chapter. (emphasis

adde d . )

21. The sentences preceding the highlighted sentence apply

to the free - form agency proceeding leading up to the issuance of

the Variance Order, which provides a point of entry for a formal

administrative proceeding at DOAH. The sentence following the

highlighted sentence applies to the formal admin istrative

proceeding at DOAH. The transition between these proceedings

occurs in the highlighted sentence: the "supported by competent

substantial evidence" language applies to DOH's factfinding

during the free - form agency proceeding, and the "subject t o ss.

120.569 and 120.57" langua ge applies to the formal administrative

proceeding at DOAH. 11/ Thus, in the present proceeding, ADS bears

the burden of proving by a preponderance of the evidence that it

is entitled to the variance.

22. Section 120.542 imp oses three requirements for a

variance: 1) the applicant must be subject to the rule from

which the variance is sought; 12/ 2) the purpose of the statute

underlying the rule will be achieved by other means; and 3) the

application of the rule would create a substantial hardship or

violate principles of fairness. 1 3 / Section 120.542(2) explains

that a substantial hardship is a "demonstrated economic,

technological, legal, or other type of hardship to the person

requesting the variance," and "'principles of f airness' are

violated when the literal application of a rule affects a

particular person in a manner significantly different from the

way it affects other similarly situated persons who are subject

to the rule."

23. The three rule provisions from which AD S seeks a

variance require analysis of rules 64E - 6.008 and 64E - 6.009.

Rule 64E - 6.008 is entitled, "System Size Determinations."

Rule 64E - 6.008 specifies the size requirements of various OSTDS

components, including the minimum area of drainfield systems ,

which are spec ified at rule 64E - 6.008(5) and are also subject to

the criteria, including sizing criteria, set forth in

rule 6 4E - 6.014. In general, rule 64E - 6.008 applies to standard

systems, including "standard subsurface drainfield systems."

Systems described in rule 64E - 6.008 shall be referred to as

Standard Systems or Standard Drainfield Systems.

24. Rule 64E - 6.009 is entitled, "Alternative Systems."

Alternative Systems, including Alternative Drainfield Systems,

are described in rule 64E - 6.009, which provides that Alternative

Systems may be installed where Standard Systems are "not

suitable" or Alternative Systems are "more feasible."

25. Rule 64E - 6.009 identifies three types of Alternative

Drainfield Systems. Rule 64E - 6.009(3) provides the r equirements

for "mound systems," including mound drainfield systems. Rule

64E - 6.009(5) provides the requirements for "drip irrigation

systems" when used in place of mineral - aggregate drainfields.

Rule 64E - 6.009(6) provides the requirements for "tire chip

aggregate" drainfield systems when used in place of the mineral -

aggregate drainfields.

26. Finally, 14/ rule 64E - 6.009(7) and (8) provides:

(7) Alternative system component and design

approval Î After innovative system testing is

completed, requests for approval of system

components and designs which are not

specifically addressed in this chapter shall

be submitted to the departmentÓs Bureau of

Onsite Sewage Programs.

(a) Requests for alternative system

component material and design approval shall

i nclude:

1. Detailed system design and

construction plans by an engineer licensed in

the State of Florida;

2. Certification of the performance

capabilities of the product submitted by an

engineer licensed in the State of Florida;

3. R esearch supporting the proposed

system materials;

4. Empirical data showing results of

innovative system testing in the State of

Florida; and

5. A design, installation and

maintenance manual showing how to design and

install the system in a ccordance with this

chapter for standard, filled, mounded,

gravity - fed, dosed, bed and trench

configurations.

(b) In addition to those items listed in

paragraph 64E - 6.009(7)(a), F.A.C.,

manufacturers of drip effluent disposal

system distribution lines , emitters, and

components shall apply for and obtain

approval from the Bureau of Onsite Sewage

Programs for specific model numbers or part

numbers prior to inclusion of the components

on any site specific permit application.

ManufacturerÓs of drip effluen t disposal

system components shall provide design and

installation manuals for engineering and

construction guidance. Design manuals shall

include tables that detail flow rates vs.

pressure and pressure loss per length(s) of

distribution pipe.

(c) Th e detailed plans and information

submitted with the approval request shall be

reviewed by the department onsite sewage

program to determine whether or not there is

a reasonable certainty of the effectiveness

and reliability of the proposed alternative

syst em component. If the department is not

satisfied that the information provided

provides reasonable evidence of the

effectiveness and reliability of the

alternative system component and designs, the

department shall deny the approval.

Department approval o f any alternative system

component does not guarantee or imply that

any individual system installation will

perform satisfactorily for a specific period

of time. Upon department approval of the

material and design, the manufacturer shall

list the departme nt approval date in the

installation and design manual. Proposals to

amend the approved installation and design

manual shall be submitted to the bureau for

approval. The date of amendment approval

shall be included in the manual.

( d) Except as provi ded for in Part IV of

this chapter, alternative drainfield

materials and designs shall not be approved

which would result in a reduction in

drainfield size using the mineral aggregate

drainfield system as described in

64E - 6.014, F.A.C., and the total surf ace area

of soil at the bottom of the drainfield as

the criteria for drainfield sizing

comparisons. Alternative system component

and design approvals shall not be granted for

the following items:

1. Those which, in whole or in part,

are used to ac hieve a more advanced level of

treatment than the baseline treatment level

specified in part IV of this chapter;

2. Aerobic treatment units;

3. Septic tank designs, filters,

seals, and sealants;

4. Additives;

5. Header and d rainfield pipe,

including their layout; and

6. Water table separation and setback

requirements.

(e) Unless determined unnecessary or

impractical by the Department at the time of

component approval, effective January 1,

2010, all components sha ll be labeled with

the name of the manufacturer and the model

identification of the component. The design,

installation and maintenance manual shall

show the location of the label and shall

include an illustration of a typical label.

The label shall be i n a location where it

will be visible or easily exposed at the time

of system inspection. All identifying marks

shall be inscribed or affixed at the point of

manufacture.

(8) Other alternative systems Î systems such

as low pressure distribution network s, small

diameter gravity sewers, low pressure sewer

systems, alternating absorption fields, and

sand filters designed and submitted by an

engineer who is licensed in the State of

Florida, meeting the general requirements of

this chapter, shall be approved by the DOH

county health department where evidence

exists that use of such systems will not

create sanitary nuisance conditions, health

hazards or pollute receiving waters. Use of

an alternative system may require the

establishment of procedures for rout ine

maintenance, operational surveillance, and

environmental monitoring to assure the system

continues to function properly.

27. Rule 64E - 6.009(8) applies to Alternative Systems,

including Alternative Drainfield Systems, that are not identif i ed

in the pr eceding subsections of the rule.

28. Rule 64E - 6.009(7) provides the means by which to obtain

DOH's approval for the use of an Alternative System whose

"components and designs" have not already been approved elsewhere

in chapter 64E - 6. Obviously, the co mponents and designs of

Standard Systems are covered by rule 64E - 6.008, and most, if not

all, of the components and designs of three Alternative

Drainfield Systems -- mound systems, drip irrigation systems, and

tire chip aggregate systems -- are covered in the subsections of

rule 64E - 6.009 cited immediately above.

29. For an Alternative System whose components and designs

are not addressed elsewhere in chapter 64E - 6, rule 64 - 6.009(7)

requires the submittal to DOH 15/ of certain information to obtain

approval fo r the use of this system. This information includes

detailed design and construction plans from a licensed engineer,

certification from a licensed engineer of the performance

capabilities of the proposed Alternative System, research

supporting the materia ls of the proposed Alternative System, and

a design and installation manual.

30. For a proposed Alternative System that is also an

"innovative system," rule 64E - 6.009(7) and (7)(a)4. requires

"innovative system testing." According to rule 64E - 6.002(30) , an

"innovative system" is defined in section 381.0065(2). Section

381.0065(2)(h) defines an "innovative system" as an OSTDS "that,

in whole or in part, employs materials, devices, or techniques

that are novel or unique and that have not been successfull y

field - tested under sound scientific and engineering principles

under climatic and soil conditions found in this state."

31. As DOH contends, the Septic Stack is not an "innovative

system." It is functionally equivalent to the MPS, which, after

extensiv e innovative system testing 15 years ago and over 10,000

installations in the field over a ten - year period without

reported problems, is no longer the innovative system that it was

when Petitioner first proposed its use in Florida. Although the

phrasing o f the references to innovative system testing in rule

64E - 6.009(7) and (7)(a)4. could be clearer, essentially, these

provisions apply only to Alternative Systems that are also

innovative systems; it makes no sense to require innovative

system testing -- or t he data from such testing -- of Alternative

Systems that are not innovative systems.

32. The Septic Stack is thus not subject to these rule

provisions, so ADS has failed the first requirement for a

variance -- being subject to these two rule provisions fr om which a

variance is sought. Additionally, for the reasons stated in the

Findings of Fact, a variance from these two rule provisions is

unnecessary to prevent a substantial hardship or unfairness.

33. However, the Septic Stack is subject to the third r ule

provision: rule 64E - 6.009(7)(d). As noted above, this rule

prohibits the use of a drainfield, including the Septic Stack,

even if it is not an innovative system, with an area smaller than

the area of a mineral - aggregate drainfield. 16/

34. It would be unfair not to grant a variance from this

rule provision. The literal application of this rule provision

would affect ADS in a manner significantly different from the way

it affects Petitioner -- and for no good reason given the

functional equivalence of the two Alternative Drainfield Systems.

35. The statute implemented by rule 64E - 6.009 is section

381.0065. Section 381.0065(1)(b) provides: "It is . . . the

intent of the Legislature that the installation and use of onsite

sewage treatment and disposal systems not adversely affect the

public health or significantly degrade the groundwater or surface

water." The purpose of section 381.0065 is met, even after the

issua nce of a variance from rule 64E - 6.009(7)(d), by the

functional equivalence of the Septi c Stack to the MPS and the

successful record of the MPS over a period of several years.

36. As noted above, DOAH jurisdiction requires that the

Variance Order determines Petitioner's substantial interests. In

general, a showing of substantial inte rest s requires an

injury - in - fact of sufficient immediacy to entitle the party to a

formal administrative hearing and of a type or nature that the

proceeding is desig ned to protect. Agrico Chem. Co. v. Dep't of

Env t l . Reg. , 406 So. 2d 478 (Fla. 2d DCA 1981). 17/

37. Plainly, Petitioner has demonstrated a high degree of

potential injury in fact from the Variance Order. The Septic

Stack is indistinguishable from the MPS, which, as an innovative

product, has controlled the Florida market for drainfield systems

of this type of construction. The entry of the Septic Stack into

the Florida market will result in economic injury to Petitioner

proportionate to the lost sales that ADS proved that it would

suffer by any delay in bringing the Septic Stack to the Florida

ma rket.

38. The closer question is whether the nature of

Petitioner's economic injury is within the protection of section

381.0065, which is the sole permitting statute at issue in this

case. In claiming that its substantial interests are determined

by the Variance Order, Petitioner relies in part on the

limitation in section 381.0065(3)(e) on the number of innovative

systems. The Variance Order assumes that ADS is subject to the

two provisions of rule 64E - 6.009(7) applicable to innovative

systems, and the parties have shared this assumption from the

commencement of the formal administrative proceeding through the

filing of proposed recommended orders.

39. Although it is now clear the Septic Stack is not

subject to these two rule provisions, the jurisdicti onal

determination of substantial interests is prospective, not

retrospective. Peace River/Manasota Regional Water Supply

Authority v. IMC Phosphates Co. , 18 So. 3d 1079, 1082 - 84 (Fla. 2d

DCA 2009) (whether petitioner's substantial interests "could be

aff ected by the agen cy's action"); Palm Beach Cnty. Envtl. Coal.

v. Dep't of Envtl. Protection , 14 So. 3d 1076, 1078 (Fla. 4th DCA

2009) (petitioners' substantial interests "reasonably could be

affected by the proposed activity"). A party's substantial

inter ests may not "disappear" based on the ultimate outcome of

the proceeding. Hamilton Cnty. B d . of Cnty. Comm'r v. Dep't of

Envtl. Reg . , 587 So. 2d 1378, 1383 (Fla. 1st DCA 1991).

40. Thus, the Variance Order determines Petitioner's

substantial interests. At the commencement of the case,

Petitioner's substantial interests reasonably could have been

determined by the Variance Order because the variance appeared to

permit the installation of additional innovative systems,

Petitioner sells equivalent innovativ e systems, and section

381.0065(3)(e) limits t he number of innovative systems . See

Shands Jacksonville Med. Ctr. , Inc. v. State , 123 So. 3d 86 (Fla.

1st DCA 2013). Petitioner's substantial interests do not

"disappear" because the final order ultimately c oncludes that the

Septic Stack was never subjec t to the provisions of rule

64E - 6.009(7) governing innovative systems.

41. Interestingly, Petitioner relies on Florida Medical

Association v. Department of Professional Regulation , 426 So. 2d

1112 (Fla. 1st DCA 1983), to establish substantial interests

jurisdiction. Florida Medical Association involved a rule

challenge. The court determined that the petitioner had

demonstrated that it was substantially affected by showing

economic injury and was not requir ed to show that its injury was

within the zone of interest of any statute underlying the

challenged rule. The court distinguished Agrico on the ground

that, in challenging a rule, the petitioner necessarily claimed

that the agency had committed an unlawfu l exercise of authority.

Id. at 1114 - 15.

42. At first glance, Petitioner's reliance on a rule

challenge case seems to be based on an argument that prove too

much. Petitioner essentially argues that an unlawfully issued

variance -- and, by extension, an un lawfully issued permit -- demands

the same result as an unlawful exercise of authority in a rule

case: the challenger in each such case is relieved of the

requirement of showing that its injury is within the zone of

interest of the relevant statutes. Taken to its logical extreme,

this argument would eliminate the second prong of Agrico in

variance and permitting proceedings.

43. On the facts of this case, though, Petitioner is

correct. DOH's error in proposing to grant the variance to the

two provisions of rule 64E - 6.009(7) concerning innovative systems

more closely resembles an agency's unlawful action in connecti on

with a rule than a permit. More importantly, t he effect of the

proposed variance would not be limited to a single project, such

as a water treatment plant or a dock , but would relieve ADS and

septic tank contractors from the burden of complying with the

subject rule provisions indefinitely, potentially in tens of

thousands of installations over the next several years. In this

manner, the var iance process in this case more closely resembl e s

rulemaking than, say, permitting .

44. For the variance from the rule provision specifying the

minimum area of drainfields, the variance operates as the repeal

of the rule provision and the adoption of a new rule assigning

the Septic Tank three square feet of area for each linear foot of

pipe. For the variance from the rule provisions addressing

innovative systems, the variance would have operated as an

amendment, sub silentio , of the two rule provisions mentioning

innovative systems to clarify that these provisions are

applicable only to Alternative Systems that are innovative

systems and then a determination that the amended rule is not

applicable to the Septic Stack because it is not an innovative

syste m.

45. Such ambitious exercises in issuing variances are, at

the very least, 18/ amenable to jurisdictional analysis of

substantial interests that is informed by cases involving rule

challenges. By this reasoning, economic injuries acquire the

same prom inence in this determination of substantial interest s as

they have in the determination of a substantially affected person

in a rule challenge case such as Florida Medical Association . 19/

46. Petitioner's argument concerning injury to its

environmental i nterests is unavailing . 20/

RECOMMENDATION

It is

RECOMMENDED that D epartment of Health enter a final order

determining that A dvanced Drainage Systems, Inc. is entitled to a

variance from rule 64E - 6.009(7)(d) in accordance with the formula

set forth in the Variance Order, but not from rules 64E - 6.009(7)

and (7)(a)4. as to innovative systems. 21/

DONE AND ENTERED this 1 9 th day of December , 2014 , in

Tallahassee, Leon County, Florida.

S

ROBERT E. MEALE

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 1 9 th day of December , 2014 .

ENDNOTE S

1/ ADS no longer seeks a variance from this rule, so this issue is

not addressed in this recommended order.

2/ As the court noted in Capeletti Brothers v. State , 362 So. 2d

346, 348 (Fla. 1st DCA 1978):

Ð Free - form Ñ proceed ings are nothing more than

the necessary or convenient procedures,

unknown to [chapter 120, Florida Statutes],

by which an agency transacts its day - to - day

business. [Citation omitted.] Without

summary letters, telephone calls, and other

conventional comm unications, the wheels of

government would surely grind to a halt.

3 / There is no difference between a "product" and a "system." To

conform to the nomenclature of the rules, this recommended order

will use "system."

4 / The limited warranty promises a replacement drainfield at no

cost if the Septic Stack failed within two years of installation

due to defects in materials.

5 / Consistent with the evidence received at the hearing and ADS's

characterization of the issue in its proposed recommended order ,

this recommended order construes this allegation more broadly as

economic injury.

6 / Although the Variance Order does not determine that the Septic

Stack is not an innovative system, DOH reasserted in its proposed

recommended order that the Septic Stac k is not an innovative

system. As discussed below, DOH is correct in this assertion.

Unfortunately, DOH did not analyze the consequences of

determining that the Septic Stack is not an innovative system,

but instead continued to argue that ADS should be e ntitled to a

variance from the two rule provisions that apply exclusiv ely to

innovative systems .

7 / A trial court is not bound by the parties' stipulations of law

that misstate the law. See, e.g. , Grassie v. Masterson , 221 Kan.

540, 550, 561 P.2d 796, 8 04 (1977); In re Finley Estate , 430

Mich. 590, 595 - 96, 424 N.W. 2d 272, 275 (1988). This principle

applies with particular force to administrative proceedings in

which the Administrative Law Judge, as a creature of statute,

lacks the authority to deviate from statutory directives, even at

the invitation of all of the parties.

Additionally, footnote 6 in Petitioner's proposed recommended

order suggests that Petitioner may not agree that it bears the

burden of proof or that the Administrative Law Judge is to

determine the facts by a standard other than a preponderance of

the evidence.

8 / As reflected in the transcript, the Administrative Law Judge

left the record open for various matters in response to requests

or objections of Petitioner and ADS, but ne ither party elected to

produce additional evidence following the close of the hearing.

9 / ADS projects lost sales of three million linear feet annually.

1 0/ It is open to question as to whether the parties' stipulation

was also informed by section 120.5 42(2) , which provides in part:

Variances and waivers shall be granted when

the person subject to the rule demonstrates

that the purpose of the underlying statute

will be or has been achieved by other means

by the person and when application of a rule

wo uld create a substantial hardship or would

violate principles of fairness.

Section 120.542(2) explicitly requires ADS to show that the

purpose of the underlying statute has been achieved by other

means, but, due to the placement of the second "when," does not

explicitly place upon ADS the burden of proving a hardship or

unfairness.

1 1/ "Competent substantial evidence" is evidence that "a

reasonable mind would accept as adequate to support a

conclusion." Verizon Florida, Inc. v. Jaber , 889 So. 2d 712, 71 4

n.1 (Fla. 2004). This legal standard may provide the evidentiary

standard for agency factfinding. Dusseau v. Miami - Dade Cnty. Bd.

of Cnty. Comm'r , 794 So. 2d 1270, 1274 (Fla. 2001) (citing Irvine

v. Duval Cnty. Planning Comm'n , 495 So. 2d 167 (Fla. 198 6) ) . See

also State v. Wiggins , __ So. 3d __, 2014 Fla. App. LEXIS 13751

(Fla. 1st DCA 2014).

This legal standard may also provide the evidentiary standard for

judicial review of certain agency decisions following

factfinding, as is apparent in the case s cited below. Because

DOAH is not the agency granting a variance, "competent

substantial evidence" in section 120.542(8) is not a directive

for the Administrative Law Judge to make findings of fact in

accordance with this evidentiary standard.

On the ot her hand, in accordance with the parties' apparent

stipulation and ADS's argument in its proposed recommended order,

the question in this case is whether the Administrative Law

Judge's findings of fact must conform to the standard of

"competent substantial evidence" for judicial review. This

approach would raise serious problems.

The statutory language, "subject to ss. 120.569 and 120.57,"

lacks much, if any, meaning if the Administrative Law Judge is

required to make findings in accordance with the rev iew standard

of competent substantial evidence. In such a case, as the

parties argue here, the factfinding will not conform to two of

the more basic principles of formal administrative litigation

under sections 120.569 and 120.57: the de novo hearing and the

allocation of the burden of proof to the party asserting the

affirmative of the issue. ADS's reliance on Florida Board of

Medicine v. Florida Academy of Cosmetic Surgery , 808 So. 2d 243,

257 - 58 (Fla. 1st DCA 2002) , is unpersuasive . As ADS concedes,

this case was legislatively overruled, as acknowledged in

Department of Health v. Merritt , 919 So. 2d 561, 564 (Fla. 1st

DCA 2006). Without regard to the subsequent legislation, t he

court in Cosmetic Surgery transformed a criterion for

invalidating a rule into the standard of proof for a rule

challenge case. Here, ADS invites the Administrative Law Judge

to transform a s tandard of proof for DOH's free - form proceeding

into the standard of proof in this case.

Another problem in limiting factfinding to th e review standard of

competent substantial evidence is that the Administrative Law

Judge would be limited to an examination of the evidence

supporting the Variance Order, but not any evidence opposing the

Variance Order. If the Administrative Law Judge we re to find any

competent substantial evidence supporting the agency's

determination, the inquiry would end, and he would have to

sustain the agency's determination without any examination of

opposing evidence or weighing (or reweighing) of conflicting

evid ence. Fla. Power & Light Co. v. City of Dania , 761 So. 2d

1089, 1093 - 94 (Fla. 2000); Dusseau , supra at 1275; Miami Dade

Cnty. v. Torbert , 69 So. 3d 970, 974 (Fla. 3d DCA 2011); Town of

Manalapan v. Gyongyosi , 828 So. 2d 1029, 1033 (Fla. 4th DCA

2002). In view of the limitations of the typical free - form

agency proceeding, in which evidence may not be under oath,

witnesses may not be examined or cross - examined, and the formal

participation of nonagency parties may be nonexistent, such

severe limitations on the robustness of the formal administrative

proceeding at DOAH would raise due process issues.

In Wiggins , supra , an agency hearing officer issued a final order

affirming the suspension of a driver license based on the

testimony of a law enforcement offi cer. The driver filed a

petition for certiorari in circuit court. The circuit judge

examined the evidence on which the hearing officer relied , which

included a law enforcement officer's testimony and a video

recording of the entire incident taken by a ca mera mounted in the

officer's vehicle. Finding that the video contradicted the

testimony on which the hearing officer had relied, the circuit

court, conceding that the hearing officer's order was supported

by some evidence, cited the objective evidence of the video and

determined that the hearing officer had erred as a matter of law.

The circuit court overturned the administrative suspension of the

driver license.

Quashing and remanding the circuit judge's order, a split panel

of the First District noted that the circuit court's role was

limited to assessing the evidence supporting the hearing officer

and was prohibited from assessing contrary evidence, such as the

video recording. Wiggins cites two policy reasons support ing

this restriction on circuit c ourt review. First, "litigants get

one opportunity to make an evidentiary record and to persuade the

fact - finder to one of their competing views of the evidence; they

cannot appeal to a circuit court and obtain such detailed review

again." Second, the ci rcuit court owes deference to the hearing

officer, who heard the live testimony, evaluated the video

recording in conjunction with the officer's conflicting

testimony, and possesses superior experience, as an agency

hearing officer, over driver suspension proceedings.

With the exception of relative experience, the factors cited in

Wiggins militate in favor of imposing on ADS the burden of

proving by a preponderance of the evidence that it is entitled to

the proposed variance.

1 2/ In its proposed recomm ended order, DOH cites section

120.542(5), which requires that a party seeking to file a

variance petition be "subject to regulation by an agency rule."

In contrast to this broad language, section 120.542(2), which

provides the criteria for obtaining a va riance, requires, among

other things, that the variance applicant be "subject to the

rule." The rule is, of course, the rule from which the variance

is sought.

1 3/ Section 120.542(1) imposes one prohibition: an agency may

not grant a variance from a st atute. As noted above, Petitioner

has argued that DOH is granting a variance from section

381.0065(3)(e), which states that an applicant seeking approval

of an innovative system must comply with all applicable rules.

This statutory provision imposes no r equirements on the process

by which DOH approves innovative systems; the provision merely

reinforces the obvious fact that an applicant must comply with

DOH's rules, which would be enforceable without

section 381.0065(3)(e). For this reason, Petitioner's argument

is rejected.

1 4/ There are two more subsections to rule 64E - 6.009, but they

are irrelevant to this case.

1 5/ The rule assigns certain tasks to the Bureau of Onsite Sewage

Programs, but this recommended order treats the Bureau as DOH for

the sake of simplicity.

1 6/ As cited above, rule 64E - 6.009(7)(d) prohibits a drainfield

area smaller than the drainfield area of a mineral - aggregate

drainfield, "except as provided for in Part IV of this chapter."

Chapter 64E - 6, part IV, comprises rules 64 E - 6.025, - 6.026,

- 6.027, - 6.028, - 6.029 and - 6.0295. This part generally applies

to Alternative Systems that are designed to meet quantifiable

levels of biochemical oxygen demand, total suspended solids,

total phosphorus, total nitrogen, and fecal colifo rm. These

provisions are irrelevant to the present case because the Septic

Stack is not a performance - based Alternative System within the

scope of part IV.

1 7/ In Agrico , supra , the agency had issued proposed

environmental permits that competitors of th e applicant sought to

challenge based on claims of economic injuries from the permits.

The court held that the third parties had shown a high degree of

potential injury, but had been unable to show that the nature of

their injury was within the protection of the permitting statutes

contained in chapter 403. Id. at 482.

1 8/ Although not raised by Petitioner, a related issue is to what

extent, on these facts, the Variance Order represent s an attempt

by DOH to substitute the variance process for rulemaki ng .

1 9/ Under the facts of this case, a mechanical application of the

Agrico second prong would represent, not merely reconfirmation of

the teaching of Agrico , but an extension of the teaching of

Agrico to facts not contemplated by the Agrico court. The

inquiry is to determine whether Petitioner's substantial

interests are determined by the Variance Order. To apply the

teaching from a case involving a rule challenge under section

120.56 to a case involving an adjudication of disputed facts

under section 120.569 is merely to repeat the practice of the

Agrico court, which cited only one case -- a case involving a rule

challenge -- Department of Offender Rehabilitation v. Jerry , 353

So. 2d 1230 (Fla. 1st DCA 1978).

2 0/ The purpose of the citation of Jerry , su pra , in Agrico was to

support the court's conclusion that the environmental interests

of the permit challengers were not "substantially affected" by

the permits. Whether presented by a chemical company in Agrico

or a mining company in American Independenc e Mines & Minerals Co.

v. U.S. Department of Agriculture , 494 Fed. Appx. 724, 726 - 27

(9th Cir. 2012), Petitioner, as a manufacturer of septic tank

drainfields, is not going to find any case law to support its

claim of environmental injury, even if intertwi ned with economic

injury.

2 1/ The parties agreed that the question of whether DOH should

approve the Septic Stack would be driven by the disposition of

ADS's request for a variance. Given the determination s that two

of the rule provisions do not apply to the Septic Stack and ADS

is entitled to a variance from the third provisio n, DOH should

approve the Septic Stack, as though the variances from the three

rule provisions were granted.

COPIES FURNISHED:

David C. Ashburn, Esquire

Greenberg Traurig, P.A .

101 East College Avenue

Post Office Drawer 1838

Tallahassee, Florida 32301

(eServed)

Amanda G. Bush, Esquire

Department of Health

Office of the General Counsel

4052 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1703

(eServed)

Daniel Elden Nord by, Esquire

Shutts & Bowen LLP

Suite 804

215 South Monroe Street

Tallahassee, Florida 32301

(eServed)

Joseph R. Miller, Esquire

Vorys, Sater , S eymour

and Pease, LLP

52 East Gay Street

Columbus, Ohio 43215

Mitchell A. Tobias, Esquire

Vorys, Sater, Seymour

and Pease, LLP

52 East Gay Street

Columbus, Ohio 43215

Jaime Briggs, Agency Clerk

Department of Health

4052 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1703

(eServed)

Jennifer A. Tschetter, General Counsel

Department of Health

405 2 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1703

(eServed)

John H. Armstrong, M.D., F.A.C.S.

State Surgeon General

Department of Health

4052 Bald Cypress Way, Bin A00

Tallahassee, Florida 32399 - 1703

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEP TIONS

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.