91-002273 Transportation Solutions, Inc. vs. Department Of Transportation Status: Closed Recommended Order on Monday, September 9, 1991.

Summary: Minority owner failed to demonstrate control necessary for certification as Minority Business Enterprise.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TRANSPORTATION SOLUTIONS, )

INC., )

)

)

Petitioner, )

)

vs. ) CASE NO. 91-2273

)

DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

Pursuant to notice the Division of Administrative Hearings by its duly

designated Hearing Officer, K. N. Ayers, held a formal hearing in the above

styled case on July 23, 1991, at Tampa, Florida.

APPEARANCES

For Petitioner: Mark M. Schabacker, Esquire

P.O. Box 3391

Tampa, Florida 33601-3391

For Respondent: Harry R. Bishop, Esquire

605 Suwanee St

Tallahassee, Florida 32399-0458

STATEMENT OF THE ISSUES

Whether Petitioner should be certified as a Disadvantaged Business

Enterprise.

PRELIMINARY STATEMENT

By letter dated February 19, ansportation Solutions, Inc. ( TSI),

Petitioner, requested a formal hearing to contest the denial of its application

for certification as a Disadvantaged Business Enterprise ( DBE), and these

proceedings followed. Grounds for denial of the application of TSI for

certification contained in the Department of Transportation (DOT), Respondent,

letter dated February 5, 1991, or that the minority owner of the business does

not exercise the control of the firm required by Rule 14-78.005, Florida

Administrative Code and the risks and profits of the company are not

commensurate with the ownership interest of the minority and non-minority

owners.

At the hearing Petitioner called five witnesses, Respondent called one

witness and 14 exhibits were admitted into evidenceeatment accorded

proposed findings submitted by the parties is contained in the Appendix attached

hereto and made a part hereof.

Based upon all of the evidence presented I submit the following.

FINDINGS OF FACT

1. Jennifer Morales-Allison is Hispanic-American and qualifies as a

minority as defined in Section 278.012(9), Florida Statutes (1989) (Ex. 6).

2. TSI was incorporated with the intent to obtain certification as a

Disadvantaged Business Enterprise ( DBE). In carrying out this intent Ms.

Allison owns 510 shares of the 1000 shares issued in TSI which constitutes 51%

of the stock of TSI.

3. Richard Alberts, the non-minority shareholder of TSI, owns 490 shares

or 49% of the stock of TSI. Alberts is president of TSI.

4. TSI is primarily an environmental planning consultant and contracts

generally with governments to provide environmental consulting involving road

and airport construction. Accordingly, the work performed is technical in

nature.

5. Richard Alberts has some 22 years experience in environmental

consulting primarily under contracts with the Federal Aviation Administration

involving environmental effects of airport construction and state road

departments involving environmental effects of highway construction. Prior to

the incorporation of TSI Alberts worked at Greiner, an engineering firm doing

extensive environmental consulting work, for some eight years.

6. Ms. Allison also worked at Greiner during the time Alberts was employed

there. She started out as a word processor-typist, moved up through secretary

to office manager. During her eight years at Greiner she worked as secretary

for Alberts and later as his administrative assistant. Her working experience

was predominantly administrative such as in the preparation of contracts as

opposed to technical. She has never served as a project manager or been

involved with carrying out environmental contracts other than seeing that the

proper personnel were assigned to the project and the agency was properly billed

for the services.

7. Although the evidence indicates Ms. Allison contributed $19,876 (51%)

and Alberts contributed $19,092.32 (49%) as start up capital for TSI, Ms.

Allison's contribution was obtained as a loan from Alberts for which promissory

notes were signed. These notes were intended to be repaid from profits of the

corporation, although the promissory notes are not so conditioned.

8. Alberts' salary is set at $60,000 per year and Ms. Allison's salary at

$40,000. Prior to leaving Greiner Alberts' salary was $80,000 and Ms. Allison's

salary was $28,000.

9. The bylaws of TSI (Ex. 5) provide that the president of the corporation

shall be the principal executive officer of the corporation and, subject to the

control of the board of directors, shall in general supervise and control as

manager of technology all of the business and affairs of the corporation. Both

Alberts and Allison testified that it was their intent that Alberts supervise

the technical aspects of the corporation and Allison would supervise the

business aspects of the corporation, and, if necessary, the bylaws of the

corporation would be redrawn to express that intent.

10. Both incorporators, Allison and Alberts, testified that Allison made

final decisions for the corporation and as 51% owner controlled the vote of the

board of directors comprised of Allison and Alberts. As such she had the

authority to hire and fire employees, including Alberts.

11. Without Alberts' expertise the corporation could not have successfully

commenced operations. He is the incorporator with the knowledge and experience

to bid on projects and carry out environmental consulting contracts once

obtained. He is also the person who provided all necessary working capital for

TSI to commence operations. Finally, he holds the necessary licenses and is

qualifying officer for the company's projects.

12. Evidence was submitted that Allison signs checks and contracts on

behalf of TSI, that she hires and fires employees, and that she has the final

say in all corporate decisions. This evidence is not credible with respect to

her having final say in all corporate decisions.

13. If Allison attempted to fire Alberts he could move out with the

remaining capital he provided and forthwith start another company similar to

TSI; and, if he did so, TSI would undoubtedly fail.

CONCLUSIONS OF LAW

14. The Division of Administrative Hearings has jurisdiction over the

parties to, and the subject matter of, these proceedings.

15. The Florida Department of Transportation ( FDOT) is the recipient of

highway construction funds received from the Federal Highway Administration

( FHWA) as defined in 49 CFR 23.5 and is, therefore, required to comply with the

provisions of 43 CFR 23 in certifying DBEs.

16. 49 CFR 23.53 establishes eligibility standards for certification as a

DBE. To be eligible for such certification the ownership by the minority member

of the applicant shall be real, substantial, and continuous and shall go beyond

the pro forma ownership of the firm as reflected in its ownership documents.

17. The minority owner must possess the power to direct or cause the

direction of the management and policies of the firm and make day-to-day as well

as major decisions on matters of management, policy, and operations. If the

owners of the firm who are not minorities or women are disproportionately

responsible for the operation of the firm, than the firm is not controlled by

minorities or women and shall not be considered an MBE within the meaning of

this part. 49 CFR 23.53(4).

18. The contributions of capital or expertise by the minority or women

owners to acquire their interests in the firm shall be real and substantial.

Examples of insufficient contributions include a promise to contribute capital,

a note payable to the firm or its owners who are not socially or economically

disadvantaged, or the mere participation as an employee, rather than as a

manager. 49 CFR 23.53(6).

19. Respondent's rules establishing standards for certification are

contained in Rule 14-78.004, Florida Administrative Code. This section provides

in part:

(c) The ownership and control exercised by

the socially and economically disadvantaged

individuals shall be real, substantial, and

continuing, and shall go beyond mere pro forma

ownership of the firm, as reflected in ownership

documents. The socially and economically

disadvantaged owners shall enjoy the customary

incidents of ownership and shall share in the

risks and profits commensurate with their

ownership interests, as demonstrated by an

examination of the substance rather than form

of financial and managerial arrangements.

(e) In determining whether the socially and

economically disadvantaged owners also possess

the power to direct or cause the direction of

the management, policies and operations of the

firm and have the requisite decision-making

authority, the Department may look to the

control lodged in the owners who are not

socially and economically disadvantaged

individuals. If the owners who are not

socially and economically disadvantaged

individuals are disproportionately or primarily

responsible for the operation of the enterprise

or if there exists any requirement which prevents

the socially and disadvantaged owners from making

business decisions without concurrence of any

owner or employee who is not a socially or

disadvantaged individual, then the enterprise,

for purposes of this rule chapter, is not

controlled by socially and economically

disadvantaged individuals and shall not be

considered a DBE within the meaning of this

rule chapter.

(f) To be certified under this rule chapter,

the DBE shall be one in which the contributions

of capital or experience invested by the socially

and economically disadvantaged individual owner

shall be real and substantial. Examples of

insufficient contributions include, but are

not limited to, a promise to contribute capital,

a note payable to the DBE enterprise or its

owners who are neither socially and economically

disadvantaged individuals, or the mere participation

as an employee, rather than as a decision-maker.

20. Applying these rules to the facts involving the ownership and

operation of TSI, it is clear that the minority owner contributed neither

capital nor expertise essential to the operation of TSI as an enterprise capable

of performing the type work for which it was incorporated. Ms. Allison's

majority ownership is more pro forma than real and, despite their self-serving

testimony to the contrary notwithstanding, it is Alberts rather than Allison who

controls the operation of TSI.

21. In these proceedings the Petitioner has the burden to prove, by a

preponderance of the evidence, that Ms. Allison as minority owner of the

business exercises that degree of control necessary to qualify for certification

as a Disadvantaged Business Enterprise. Balino v. Department of Health and

Rehabilitative Services, 348 So.2d 349 (Fla. 1 DCA 1977); Florida Department of

Transportation v. JWC Company, Inc., 396 So.2d 778 (Fla. 1 DCA 1981). This

burden Petitioner has failed to meet.

22. From the foregoing it is concluded that Petitioner has failed to show

that the minority owner of TSI, Jennifer Morales-Allison exercises the control

necessary to qualify TSI as a Disadvantaged Business Enterprise.

RECOMMENDATION

It is,

RECOMMENDED:

That the application of Transportation Solutions, Inc. for certification as

a Disadvantaged Business Enterprise be disapproved.

DONE and ENTERED this 9th day of September, 1991, in Tallahassee, Florida.

_________________________________

K. N. AYERS

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of September, 1991.

APPENDIX

Proposed findings submitted by Petitioner are generally accepted as

testimony of the witnesses but, insofar as this testimony is that Ms. Allison

controls the operation of TSI, those findings are rejected. Petitioner filed no

findings of fact separate from conclusions of law; accordingly, without

assigning a number to each paragraph, a ruling on Petitioner's proposed findings

cannot be made. Nevertheless, the ultimate paragraph, starting at the bottom of

page 6 of the proposed Order, is rejected insofar as it concludes that Ms.

Allison has the requisite control to qualify TSI as a minority business

enterprise.

Proposed findings submitted by Respondent are accepted and are generally

included in the Hearing Officer's findings of fact.

COPIES FURNISHED:

Mark M. Schabacker, Esquire

P.O. Box 3391

Tampa, FL 33601-3391

Harry R. Bishop, Esquire

605 Suwanee Street

Tallahassee, FL 32399-0458

Ben G. Watts, Secretary

Department of Transportation

Haydon Burns Building

605 Suwanee Street

Tallahassee, FL 32399-0458

Thornton J. Williams, General Counsel

Department of Transportation

562 Haydon Burns Building

Tallahassee, FL 32399-0458

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

ALL PARTIES HAVE THE RIGHT TO SUBMIT WRITTEN EXCEPTIONS TO THIS RECOMMENDED

ORDER. ALL AGENCIES ALLOW EACH PARTY AT LEAST 10 DAYS IN WHICH TO SUBMIT

WRITTEN EXCEPTIONS. SOME AGENCIES ALLOW A LARGER PERIOD WITHIN WHICH TO SUBMIT

WRITTEN EXCEPTIONS. YOU SHOULD CONTACT THE AGENCY THAT WILL ISSUE THE FINAL

ORDER IN THIS CASE CONCERNING AGENCY RULES ON THE DEADLINE FOR FILING EXCEPTIONS

TO THIS RECOMMENDED ORDER. ANY EXCEPTIONS TO THIS RECOMMENDED ORDER SHOULD BE

FILED WITH THE AGENCY THAT WILL ISSUE THE FINAL ORDER IN THIS CASE.